According to Allianz chief economic adviser Mohamed El-Erian, there is a risk that the Federal Reserve's practice of delaying interest rate cuts to curb inflation will fall behind the situation
The Zhitong Finance App learned that according to Allianz's chief economic adviser Mohamed El-Erian, the Federal Reserve's practice of delaying interest rate cuts to curb inflation is at risk of falling behind the situation.
El-Erian said, “The Federal Reserve made adjustments based on the data. This is the opposite of their adjustment in December, and now they have to make a U-turn. As they are turning their heads and staying high for a longer period of time, the market is moving in a different direction.” He also mentioned that the Federal Reserve has to make adjustments based on actual economic conditions rather than inflation data.
Like other market observers, El-Erian previously proposed that in a new era where price growth is facing structural pressure, the Bank of America should look beyond the 2% inflation target.
He said, “Is the inflation target the right target? We're all talking about hoping to get back to 2%, and 2% is completely arbitrary. If we pursue the wrong inflation target, that mistake will mean unnecessarily sacrificing growth. This is a world affected by higher inflation. And we've just experienced a world affected by lower inflation.”
On Wednesday, US Treasury yields rose as consumer prices showed a slowdown in overall growth in April, and investors were betting that the Federal Reserve would cut interest rates by up to two quarters before December. However, the inflation report also shows that price growth in some sectors of the service economy is difficult to control.