Top economist Mohamed El-Erian said the Fed “made two big mistakes that I think are going to go down in the history books” and spur a “damaging” recession.
Speaking on CBS’ “Face the Nation” on Sunday, El-Erian told host, Major Garrett, “I fear that we risk a very high probability of a damaging recession that was totally avoidable.”
The chief economic adviser at Allianz cited two errors made by the Federal Reserve. He said the Fed’s first mistake was mischaracterizing inflation as transitory. “By that, they meant it is temporary, it’s reversible, don’t worry about it,” he said.
The second mistake was when the Fed finally recognized inflation was persistent and high, yet “didn’t act in a meaningful way,” he added.
El-Erian said the Fed not easing their foot off the accelerator last year means they’ve had to slam the breaks too hard this year, “which would tip us into recession.”
“So yes, unfortunately, this will go down in a big policy error by the Federal Reserve,” he said. “Even [Federal Reserve] Chair Powell has gone from looking for a soft landing to soft-ish landing to now talking about pain. And that is the problem. That is the cost of a Federal Reserve being late. Not only does it have to overcome inflation, but it has to restore its credibility,” he said.
