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

He said most of the inflation "could have been avoided if early action had been taken" by the Federal Reserve . 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.


  • 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?


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.


The transcript of EE's interview is here.

Allianz Chief Economic Advisor Mohamed El-Erian speaking