Mohamed El Erian Says Federal Reserve's FOMC Press Conference Could Be Viewed As 'Confused And Confusing'

What Happened: Esteemed economist Mohamed El-Erian aired his apprehension regarding the Federal Reserve’s recent Federal Open Market Committee press conference on Tuesday.

El-Erian frets that the economic and policy signals may be perceived as “confused and confusing” by many.

The economist suggested this confusion could be interpreted in two ways. Some might see it as an unavoidable result of the current inflation and policy cycle, while others might regard it as further signs of the Fed’s communication challenges.

See Also: Mohamed El-Erian Identifies Seismic Shift In The World’s Economic Landscape — Implications Extend ‘Well B

Why It Matters: During its September meeting, the Fed decided to maintain the federal funds rate at its existing range of 5.25% to 5.5%. The Fed statement also hinted at possible future rate hikes to bring inflation to the 2% target, depending on upcoming economic data.

Following the meeting, the Nasdaq 100 index dipped to late August lows. Many analysts saw the Fed’s decision as a “hawkish hold”. Fed Chair Jerome Powell reiterated an intention to proceed “meeting by meeting”, but also stressed the need to keep rates high for a longer period until confidence in inflation returning to the 2% target is established.

Just a day before the Fed’s meeting, El-Erian highlighted a significant shift in the global economy, underlining an increasingly rigid supply side. This shift is in stark contrast with the previous decade, which was dominated by insufficient aggregate demand.

Photo Courtesy: Wikimedia Commons

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