El-Erian said the Fed made two big mistakes that will go down as one of the worst mistakes in history.
Speaking on CBS' "Face the Nation" on Sunday, El-Erian said, "I fear that we risk a very high probability of a damaging recession that was completely avoidable."
The Federal Reserve made two mistakes, according to the chief economic adviser. The first mistake the Fed made was mischaracterizing inflation. He said that they meant it was temporary and not to worry about it.
He said the second mistake was when the Fed didn't act in a meaningful way when they realized inflation was high.
El-Erian said the Fed had to slam the breaks this year because they didn't ease their foot off the pedal last year.
He said that this will go down in a big mistake by the Federal Reserve. Powell went from looking for a soft landing to talking about pain. That is the issue. The cost of being late is what it is. It has to overcome inflation and restore its credibility.
El-Erian advised investors to stop their love affair with the Fed when it decided to reverse course on its monetary tightening.
The Fed has been raising interest rates in order to keep inflation in check.
The inflation report for September is due on Thursday. The Fed is expected to raise the federal funds rate by a quarter of a percentage point at its November 1-2 meeting. The Fed has raised the rate by 75 basis points in the last three meetings.
Interest rates on loans, credit cards, and bank accounts are influenced by changes in the federal funds rate. Potential buyers can be pushed out of the market when mortgage rates go up.
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