The economist and adviser at Allianz SE Mohamed El-Erian said that the Fed needs to take urgent measures to bring inflation under control, and added that the Fed should not consider the increase in inflation in the US a temporary phenomenon
"The characterization of inflation as temporary creates a high probability of making a mistake. Thus, the Fed should act quickly to bring inflation under control and restore confidence in itself. If the Fed doesn't take action, we may see higher inflation expectations."
El-Erian repeated that the Fed underestimates inflation risks, as the recovery of the US economy after the pandemic shock accelerates price growth.
According to El-Erian, the Fed can solve the problem of inflation if it now honestly admits its past mistakes. He also called on policymakers to reduce liquidity that they inject, and reduce support for the housing market, and warned that failure to do so could eventually lead to a recession in the economy.
Given the latest US inflation data, which reflected price growth at the fastest pace in almost 40 years, many economists believe that the Fed at its December meeting will announce an acceleration in the pace of reducing bond purchases.
Meanwhile, El-Erian noted that the US probably has not yet reached the peak of inflation, and added that CPI growth is likely to remain close to current levels for several months.