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Sees more volatility as tightening spurs financial instability
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Central banks won’t allow higher inflation without ‘more pain’
Mohamed El-Erian has a cautionary word for anyone anticipating an end to interest-rate increases from the Federal Reserve and other central banks.
“All of you who are looking for a pivot, be careful what you wish for,” the chief economic adviser at Allianz SE and Gramercy Funds chairman told Bloomberg Television’s The Open on Friday. “This pivot only happens if you have an economic accident or a financial accident. And the journey to an economic accident or a financial accident is a very painful journey.”
The closely followed investor and strategist points to the upheaval in markets this past week, highlighted by the Bank of England intervening to stop a meltdown in gilts after a UK tax cut proposal, as a sign of economic fragility.
“This week has told us a lot about the transitions going on,” said El-Erian, who is also president of Queens College, Cambridge and a Bloomberg Opinion columnist. “The next few weeks are going to be pretty volatile.”
More than a year ago, El-Erian said the Fed was behind the curve in fighting the fastest inflation in decades, a