21 Jun Top economist Mohamed El-Erian

On Wednesday, the Feds hiked interest rates by 75 basis points (the highest since 1994). Mohamed El-Erian, CEO of Allianz calls this hike part of a “great awakening” for central banks and others. The Swiss National bank also hiked 50 bps as well, and the European Central Bank announced it would have its first-rate hike in over a decade next month. El-Erian warns we should be more careful and considerate in what we invest in because it is going to be a bumpy economy soon.

Over the past 14 years the monetary policy both internationally and in the US has been loose with low interest rates and letting money flow to commercial banks through buying assets and stocks. The inflation rate for all consumer goods increased in May to 8.6% and it is feared it may reach 9% soon. El-Erian said the Swiss currency hiking rates was more significant than the Fed’s, due to Switzerland always fighting as a strong currency. He said, “For it to get ahead of the ECB and hike not 25, but 50, shows you that we are in the midst of a secular change.”

El-Erian states that in the US, the financial conditions have tightened in a disorderly fashion and are lagging in regard to its approach towards inflation from the Fed. If it continues this way, it will continue to be problematic for the markets.

Source:

https://fortune.com/2022/06/17/economist-mohamed-el-erian-inflation-bubble-fed-paradigm-shift/