Economist Warns of Possible Recession if Fed Falls Behind on Inflation

Source: CNBC

Allianz Chief Economic Adviser Mohamed El-Erian believes officials of the Federal Reserve are downplaying inflation risks which could pull the United States into another recession.

• El-Erian raised concerns on inflation as he said he sees evidence of inflation being more long term every day.
• The economist is also concerned that the Fed is falling behind and may be forced to catch up, driving more worries.
• The Federal Reserve could be pushed to hike rates and otherwise tighten monetary policy sooner than expected.
• El-Erian said recession usually comes as brakes are slammed, versus gradually slowing acceleration.
• He said data may be showing that inflation is not transitory but the market will continue to focus on Fed’s pronouncements.
• The Fed has maintained that the inflation uptick is transitory and will eventually taper down in line with its 2% target.
• The core personal consumption expenditures price index stood at 3.4% in May to mark the highest in nearly two decades or since 1992.