“I fear that we risk a very high probability of a damaging recession that was completely avoidable,” El-Erian tell CBS’s “Face the Nation,” arguing that the Federal Reserve made mistakes that “will go down in the history books”.
“People wrongly characterize inflation as transitory. By it, they meant it’s temporary, it’s reversible, don’t worry about it. That was mistake number one. And then mistake number two, when they finally realized that inflation is persistent and high. They did not act. They didn’t act meaningfully,” El-Erian said.
The Federal Reserve raised interest rates to try to curb inflation as concerns about a potential recession grow.
The United Nations last week warned of a global recession as international economies take steps to combat inflation. A survey released last week found that nearly 9 out of 10 global CEOs expect a recession in the next year.
“Even [Federal Reserve] Chairman Powell has gone from soft landing to soft landing to now talk about pain. And that’s the problem. This is the cost of a Federal Reserve that is late. It must not only overcome inflation, but it must restore its credibility,” El-Erian said of the economic institution.
- Head economist says the US was headed for a recession that was ‘entirely avoidable’
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