Market prices have swung wildly in recent days as traders bet on a drop in borrowing costs amid signs that inflation is falling and comments from Fed Chair Jerome Powell that the actions taken so far have pushed policy “well into restrictive territory.”
The US Federal Reserve is losing control of its messaging on interest rates, but financial markets are wrong to expect imminent cuts, Allianz Chief Economic Adviser Mohamed El-Erian said.
El-Erian, a Bloomberg Opinion columnist, said the Fed may well tolerate higher inflation instead of pushing the economy into recession to hit its 2% target. But he also said investors are over-reacting by pricing in sharp rate cuts.
