El-Erian expects that higher interest rates will lead to inflation falling by the end of this year but forecasts that the US Consumer Price Index will blast above the Fed’s 2% target. The July update on PCI is due Wednesday.
“[Inflation] will come down by the end of the year, but it will remain sticky,” El-Erian said. “I’m looking for a core CPI in the 4.5% to 5.5% range, so well above the 2% target of the Fed.”
“The core number is going to stay stubbornly high,” he added. “That just speaks to an inflation process that has become more entrenched and has become more broad-based in our economy.”
