Mohamed El-Erian said the Federal Reserve’s latest policy communication was seen as “confused and confusing.” The Fed left interest rates unchanged at its Wednesday meeting, but signaled future increases. The decision was met with a range of reactions, both positive and negative. Loading Something is loading.
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The Federal Reserve’s latest policy talk, following its unusual move to hold interest rates and signal hikes at once, has bewildered many in the market, according to Mohamed El-Erian.
In a tweet on Thursday, the top economist said the central bank’s policy communication this week was seen as “confused and confusing,” and shared tweets echoing a similar sentiment from journalists and experts including economist David Rosenberg.
Fed chair Jerome Powell left interest rates unchanged this week for the first time in 11 meetings, but projected two more 25-basis-point increases before year-end – a move that has been seen as a “hawkish pause” by markets.
“A sample from quite a set of reactions to what is seen as confused and confusing Fed communication,” El-Erian said in the tweet, accompanied by three critical observations the Fed from market commentators including Rosenberg.
The Rosenberg Research chief laid into the Fed, saying “Powell gets D for Disingenuousness.”
“Last July, he told us that headline inflation mattered more than the core, because that is what households respond to. Yesterday he switches course and tells us that it is sticky core that matters most. Which is it??” Rosenberg added.
Ex-Treasury Secretary Summers told Bloomberg that the Fed’s late decision comes across as inconsistent and confusing, and may have been driven partly by the central bank’s internal politics.
The Fed has been on an aggressive path to cool inflation over the past year, hiking interest rates by 500 basis points to a range between 5%-5.25%. While the hikes have helped tame price pressures from their 40-year highs reached last year, inflation still remains double the Fed’s 2% target.