El-Erian is the chief economic adviser.
Rob Kim is a photographer.
The Federal Reserve needs to start gaining back its credibility this week as it's likely that it will stick around at the nearly 40-year high it hit in November, said Mohamed El-Erian on CBS's "Face the Nation".
The last meeting of the Federal Reserve will be held on Wednesday. El-Erian said on CBS's Sunday morning show that the Fed's characterization of inflation as fleeting is probably the worst inflation call in the central bank's history. The famed economist has said that opinion before.
El-Erian said there's a high chance that the Fed will make a mistake in calling hot consumer prices transitory. Consumer prices increases are not structural and will climb on a temporary basis, according to anecdotal inflation.
The Fed needs to regain control of the inflation narrative this week. El-Erian said that it will become a driver of higher inflation expectations that feed onto themselves.
In November, the annual inflation rose to 6.8%. The Bureau of Labor Statistics reported that the pace of price growth was the fastest since 1982. As the US economy recovers from the coronaviruses epidemic, inflation has been marching higher.
El-Erian didn't advocate for the Fed to end its stimulatory measures in order to tame inflation. Such a move could cause the world's largest economy to go into recession.
El-Erian told Margaret Brennan that they need to ease their foot off the pedal. There is no reason why the housing market should be boosted at a time when Americans are not buying homes. They should let their foot off the pedal in order to not slam on the brakes.
The Fed said it would begin to reduce its economic support measures in November. It planned to reduce its Treasury purchases by $10 billion a month and its mortgage-backed securities purchases by $5 billion a month.
El-Erian said the country hasn't yet passed peak inflation and that it will be a few months before prices start to cool.
The original drivers of higher inflation are still here, but are less powerful. The driver planted all the other seeds for inflation. That's not a problem because of what the White House is doing. The Federal Reserve is failing to do something.
Business Insider has an original article.
