Submitted by Taps Coogan on the 3rd of December 2018 to The Sounding Line.
Allianz chief economic advisor Mohamed El-Erian recently spoke to Bloomberg to warn that, despite the Fed’s recent statements which were widely perceived to be a dovish pivot, global monetary conditions are still tightening and the Fed is not necessarily as dovish as many now think.
“If the ECB stops buying at the end of this month, which it said it would…, than we do have QT (quantitative tightening) going on around the world. So…, there will be fewer buyers of government bonds, especially non-commercial buyers… The Fed reclaimed optionality with respect to interest rates, not this year but next year, but the market, which has been conditioned by years of central banks repressing financial volatility, have taken that notion a little bit too far. They’ve converted it into a ‘Powell Put.’ We’re not there. We may get there, but we are not there right now. This (recent Fed statement) is much more just a reclaiming optionality… The mindset of the market is looking for the ‘Bernanke Put.’ It’s looking for the ‘Yellen Put.’ So, it will take any signal and run with it…”
There is more to the interview, so enjoy it above.
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