El-Erian on US CPI inflation says "we may well get to 9%"

Chief economic adviser to Allianz Mohamed El-Erian spoke with CBS' "Face the Nation" over the weekend.

He said most of the inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term "could have been avoided if early action had been taken" by the Federal Reserve Federal Reserve The Federal Reserve System, more commonly known as the Fed, represents the central banking system of the United States. Like other central banks globally, the Fed is responsible for monetary policy, in this case in the US.The Fed is one of the most watched and followed entities for forex traders, given its material impact on the US dollar. Founded initially in 1913, the Fed was created to perform a wide range of functions. This includes stabilizing and maintaining flexible monetary policy in the The Federal Reserve System, more commonly known as the Fed, represents the central banking system of the United States. Like other central banks globally, the Fed is responsible for monetary policy, in this case in the US.The Fed is one of the most watched and followed entities for forex traders, given its material impact on the US dollar. Founded initially in 1913, the Fed was created to perform a wide range of functions. This includes stabilizing and maintaining flexible monetary policy in the Read this Term. He now urges the Fed to regain credibility to ease long-term inflation expectations. However, on the rising CPI:

• I fear that it's still going to get worse, we may well get to 9% at this rate.

More:

• It started mainly external, exogenous, if you like, things that we imported, but then the Federal Reserve did not react. It mischaracterized what inflation is and it fell behind. And the lessons of history is, once you fall behind, you lose the ability of the first best response, you end up in this awful situation that we're in today, where you need to make a choice. Do you slam on the brakes hard to control inflation and risk of recession? Or do you just tap on the brakes and risk inflation lasting much longer than it should?

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More broadly, I liked this:

• There was hope initially, that it is transitory, meaning temporary and quickly reversible. There was hope, as you pointed out, that it had peaked. I never shared those hopes. I think you've got to be very modest about what we know about this inflation process.

Accepting what you don't know is very important. Not just if you're a central banker dealing with inflation. A bit of modesty, humility when dealing with complex systems goes a long way.

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The transcript of EE's interview is here.