Mohamed El-Erian says interest rates can be higher, faster and last longer – newsdubai

And that was before another hot inflation read shaky things again.

Economists and investors widely expect the Fed to raise its key short-term rate by 75 basis points, which would be the third time in a row. That would raise the benchmark interest rate, which affects many consumer and business loans, to somewhere between 3% and 3.25%, the highest level in 14 years.

Economist Mohamed El-Erian has been one of the world’s most famous Fed watchers for years, dating back to his days as CEO of the massive asset manager Pimco, and he has a prediction: Today’s likely hike may just be part of a larger, lasting framework in advanced economies.

“The likely 75bp hike and the forecasts and signals that come with it will be part of the HFL policy paradigm in the advanced world – higher, faster and longer with rates,” El-Erian said on Twitter on Wednesday.

August’s CPI report, released last week, revealed that the consumer price index rose 0.1% in July and 8.3% from a year earlier – down slightly from July’s year-on-year reading of 8.5 % and June’s highest level in four decades of 9.1%.

El-Erian previously pushed the idea of ​​”transient” inflation and even warned of the pernicious possibility of global stagflation (slow growth and high unemployment combined with high inflation). He told recently Assets there were ways policymakers could try to avoid stagflation. Of those, El-Erian said the Fed should continue to raise interest rates until inflation is controlled, though that alone would not do the trick.

“[Stagflation] can be remedied through a more timely, comprehensive policy approach that includes the Federal Reserve finally getting its arms around the inflation problem, pro-growth and pro-productivity structural reforms, better protection of the most vulnerable parts of our society, and improved international policy cooperation,” said El-Erian Assets.

Meanwhile, economists like William Spriggs, a professor at Howard University, suggest the Fed should slow its aggressive rate hikes before it pushes the nation into recession and people lose their jobs.

With his tweet on Wednesday, El-Erian appeared to reiterate his earlier sentiment, indicating that interest rates could remain higher for longer with less time in between – adding that things may have become more complex amid Russia’s latest moves in its war in Ukraine.

“The related complexities have been amplified by the Russian news right now,” El-Erian wrote.

He was referring to Russian President Vladimir Putin’s pre-recorded address to the nation on Wednesday, escalating his war effort. Putin said he would order 300,000 more reservists while also threatening to use nuclear weapons.

The war in Ukraine is already pushing Europe into recession and fueling its growing energy crisis, so much so that El-Erian said last week that a European recession was “a done deal” as far as he was concerned.

The Fed is expected to publish its announcement on interest rates, inflation and the economy at 2:00 PM ET Wednesday.