Taps Coogan – September 2nd, 2021
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Mohamed El-Erian, Allianz chief economic advisor, recently spoke with CNBC to warn that the Fed is falling further behind economic realities and misinterpreting the stagflationary nature of Covid.
Some excerpts from El-Erian:
“I did not (feel better after Jerome Powell’s Jackson Hole speech). I did not because. while Jerome Powell acknowledged two things, one that… inflation is persistently higher than what the Fed expected, and second, the movement among the FOMC to an earlier taper. He packaged his expectations in a very dovish tone and the market got it immediately…”
“The problem with the Delta variant in particular is it is stagflationary. Yes, it depressed demand, or at least the recovery in demand, but it also disrupts the supply chain even more…”
The key question for the Fed is why is it still trying to stimulate artificial demand in an environment with inflation above target for nearly all of 2021, persistent supply chain bottlenecks, and labor shortages.
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