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Allianz Chief Economic Adviser Mohamed El-Erian stated the focus and responsibility of combating inflation lies with the Federal Reserve, not federal gas tax holidays. On “America Reports” Thursday, El-Erian warned America may “get stuck” with inflation unless the Fed takes an aggressive and proactive approach to rising costs.
MOHAMED EL-ERIAN: Inflation is high. It is hurting everybody. And this administration, like many, many other segments of society, wants to be seen to be doing something. I’m in the camp that this will not change much. Right now, the onus should be on the Federal Reserve. They need to get their act together. They need to do a better job at containing inflation expectations. And that is what’s going to determine where inflation goes from here.
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So ironically the situation is improving for the wrong reasons. International prices of oil – they are coming down. They’re coming down because demand is coming down because people are worried about the higher probability of a recession. I think you have to be really careful when you talk about these things. There are five distinct reasons why we have an inflation problem. Their importance has varied over time, and the key issue today, I repeat, it’s about the Fed. If we’re not careful, the other reasons are going to wash themselves out of the system, and we’re going to still get stuck with inflation because there’s going to be a new driver and that’s inflation expectations.
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