He said Chief Economic Adviser to Allianz SE, Mohamed El-Erian, The US economy is on a “bumpy ride to a better destination”, despite the continuing risk of the US Federal Reserve pushing the country into recession.
“Not only does it have to beat inflation, it has to restore its credibility, so I’m afraid we run the risk of a very high probability of a devastating recession that might have been completely avoided,” El-Erian added of the US central bank in an interview with CBS News on Sunday. , according to what was reported by “Bloomberg”, and reviewed by “Al Arabiya.net”.
El-Erian blamed the central bank for this risk by “squeezing the brakes this year” following being criticized for being slow in the face of inflation, which reached its highest levels in 4 decades.
The Federal Reserve has raised its benchmark index by 75 basis points 3 times in a row, and comments from Fed policy makers indicate that they are on track to deliver a fourth increase of the same size next month.
Asked regarding the possibility of a so-called soft landing for the economy, El-Erian cited a shift in Fed Chairman Jerome Powell’s comments, “Some pain is inevitable in the Fed’s inflation battle.”
The Fed last raised its benchmark interest rate by 75 basis points on September 21, and last week’s economic data continued to push for another hike, jittering markets.
The Fed’s strategy is sensitive to data, but officials made clear that it would take a lot to push them off track toward a record rate of 4.5%.
Prices in the United States rose 6.2% for the year ending in August, the 18th consecutive month of annual inflation above their 2% target, while US employers added 263,000 people to payrolls in September, a sign that core demand remains strong.
The announcement by OPEC and its allies of oil production cuts and a strong jobs report in September bolster the case for another increase of 75 basis points.
El-Erian said that while the OPEC + decision “harms the United States”, it should not surprise anyone, adding: “(OPEC) is looking to protect oil prices in the context of declining demand.”
“This should not come as a big surprise,” El-Erian said. “This is what happens historically, but it is certainly not good news for the US economy.”
