Mohamed El-Erian Sees Bigger, Faster Rate Hikes, Flags Russia Threat
- Mohamed El-Erian sees the Fed’s imminent rate hike as part of a new policy paradigm.
- The top economist predicts that interest rates will rise faster and for longer.
- El-Erian warns Russia of mobilizing more troops and threatening nuclear war.
Mohamed El-Erian warned investors to prepare for higher rates, faster and longer. He also warned that the latest escalation in Russia’s war with Ukraine further clouded the market outlook.
“A possible 75 basis point rate hike, and the forecasts and signals that come with it, will be part of the HFL policy paradigm in developed countries – higher, faster, longer,” he said. tweet on Wednesday. “The Russian news just now adds to the complexity.”
Allianz’s chief economic adviser was pointing to the possibility that the Federal Reserve could raise its benchmark interest rate by 75 basis points to a range between 3% and 3.25% later on Wednesday.The Fed is also expected to raise interest rates further to curb inflation, which Soars to 40-year high in June.
Meanwhile, Russian President Vladimir Putin on Wednesday ordered the mobilization of some 300,000 troops to support his invasion of Ukraine and signaled that he would respond to any threat to his country’s territory with nuclear force.
El-Erian has repeatedly emphasized the difficulty of overcoming inflation without devastating consequences. On Saturday, the former chief executive and co-chief investor of PIMCO raised the prospect of global “stagflation” — a painful combination of stagnant economic growth, soaring unemployment and stubborn inflation.
The economist also warned in early September that the energy crisis in Europe, ongoing lockdowns in China and rising inflation and falling consumer demand in the United States are making global growth more vulnerable. As a result, central banks are more likely to push their economies into recession, he said.
El-Erian’s latest tweet suggests that he sees continued higher interest rates and the greater risk of the Fed and its peers screwing up their inflation fight, hampering economic growth and causing widespread job losses.
