- The worst thing the Fed could do now is cut rates, according to top economist Mohamed El-Erian.
- Cutting rates to ease banking stress could lead to stagflation and financial instability, he warned.
- El-Erian has been a loud critic of Fed policy, and central bankers responded to inflation too late in his view.
Markets have been upping bets that the Federal Reserve will cut interest rates as soon as this summer as the economy deals with stress from the banking crisis, but that’s actually the worst thing the central could do at this point, according to top economist Mohamed El-Erian.
“The worst thing they could do right now is say, we have a credit issue coming, let’s cut interest rates,” the Allianz chief economic advisor said in an interview with Bloomberg on Monday. “If they do that, we could end up with stagflation and financial instability.”
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