Economist: Most inflation could have been avoided if Fed had acted sooner

El-Erian said that most of the inflation “could have been avoided if early action had been taken” by the Fed, which must now regain credibility to ease long-term inflation expectations.

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“I was very puzzled when a year ago so many people were so confident that inflation was transitory,” he said. “There was so much we didn’t understand about the post-COVID inflation that humility would have been a good idea.”

El-Erian said things still are not going well for the Fed because it has yet to explain why it got the forecast “so wrong for so long.”

El-Erian fears that in this current period of “stagflation” – low growth, high inflation – inflation may reach 9%. He called it the darkest picture of what could lead to a recession.

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