El-Erian: Fed made 2 big mistakes that’ll go in history books, spur a damaging recession

Mohamed El-Erian spoke on US TV over the weekend, CBS’ “Face the Nation” on Sunday.

El-Erian is chief economic adviser at Allianz.

He outlined what he sees as two big mistakes made by the Federal Reserve:

1. Mischaracterizing inflation as transitory:

• “By that, they meant it is temporary, it’s reversible, don’t worry about it”

2. Once the Federal Reserve finally accepted the high CPI readings were persistently high the Bank did not “act in a meaningful way”

E goes on:

• “Even Chair Powell has gone from looking for a soft landing to soft-ish landing to now talking about pain. And that is the problem. That is the cost of a Federal Reserve being late. Not only does it have to overcome inflation, but it has to restore its credibility”
• “I fear that we risk a very high probability of a damaging recession that was totally avoidable.”