Taps Coogan – May 6th, 2021

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Mohamed El-Erian, Allianz chief economic advisor, recently spoke with CNBC to urge the Fed to start “thinking about thinking about” tightening policy and to have an “open mind” about the possibility that rapidly increasing inflation may not be transitory.

 

Mr. El-Erian notes:

“The Fed is pinning itself in a corner by insisting that this (inflation) is transitory. All the evidence suggests that you should have an open mind… Warren Buffet talked about very substantial inflationary pressure. Price increases are sticking according to him and according to many others. You’ve got to keep an open mind. Unfortunately now, because it is hostage to a framework that has to be outcome based, I think the Fed has no choice but to insist (that inflation) is transitory. But I fear that this is persistent, not transitory.”

“I think what the Fed should do is what the Bank of Canada did last week. Start tapping the brakes slowly. Get out of this ‘We’re not thinking about thinking.’ Start thinking and give a clear guideline to when you will start tapering a little bit…”

Of course, no amount of urging is going to get the Fed to change its dogma or enlighten it to the over-indebtedness problem that its policies breed.

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