Top Economist El-Erian Says Wednesday's Stock Swings Prove Fed's Impact On Volatility: 'I Leave It To You To Judge...'

Allianz chief economic adviser and noted economist Mohamed El-Erian said the stock market’s volatile movement on Wednesday reinforced the Federal Reserve’s reputation as the biggest central bank contributor to market volatility "during an FOMC day."

“What stocks have done so far today Reinforces this #Fed’s multi-year reputation as the biggest (central bank) contributor to market volatility during an FOMC day. I leave it to you to judge the balance between the inherent fluidity of the situation and inconsistent communication,” El-Erian tweeted.

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Wall Street indices witnessed a volatile session during Wednesday’s policy announcement as investors and traders digested the Fed’s policy. The SPDR S&P 500 ETF Trust SPY ended the session 2.51% lower while the Vanguard Total Bond Market Index Fund ETF BND shed 0.16% on Wednesday.

“Lots of notables in Fed Chair Powell’s remarks at his press conference including a shift in the balance of policy risk: from prior concerns of being too aggressive to the current worry of doing too little. Underpinning this is— finally — better appreciation of the inflation dynamics,” El-Erian said in his tweet.

Criticism: El-Erian had said earlier that if the Fed decided to pivot it will be because of financial stability and not because of its unwillingness to consider inflation. 

The economist last month said the central bank made "two big mistakes that may go down in the history books," referring to the Fed mischaracterizing inflation as transitory and failing to act meaningfully when inflation was persistent and high.

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