Mohammed El-Erian believesfreecandycrushsodaThe Fed's postponement of interest rate cuts to curb inflation risks acting too slowly.
"The Fed reversed course based on the data. This is the exact opposite of the turn they made in December-now they have to make a 180-degree turn,"columnist El-Erian, dean of Queen's College, Cambridge, said on Friday. "They are making a 180-degree U-turn and keeping interest rates higher and longer, and the market is moving in the opposite direction."
"The Fed will have to shift-not based on inflation data, but based on the real economy," he said.
Like other market observers, El-Erian has previously suggested that in a new era of greater structural pressure on price growth, the Fed may no longer focus on the 2% inflation target.
"Is the inflation target the right target?freecandycrushsoda？We are all talking about hoping to get back to 2%,"El-Erian said. "2% is completely arbitrary. If we pursue the wrong inflation target, the risk of making mistakes is high, and that mistake means unnecessarily sacrificing the economy."
"The current world is subject to higher inflation, while we have experienced a world of lower inflation before," he added.
On Wednesday, U.S. debt rebounded after the U.S. consumer price index showed overall inflation slowed in April, and investors raised expectations for the Federal Reserve to cut interest rates twice this year. But the inflation report also suggests that in some areas of the services sector, price growth is more difficult to contain.
