Mohamed El-Erian, the chief economic adviser at Allianz, has advised the Federal Reserve to postpone a rate cut until September. He also emphasized the significance of the upcoming Jackson Hole symposium for Fed Chair Jerome Powell to regain control of the narrative.
What Happened: El-Erian, in a post on X, highlighted the ongoing debate over the Fed's policy and suggested that the focus should shift to the opportunity Powell has at the Jackson Hole symposium to steer the narrative and provide forward policy guidance.
"It needs to go beyond this and also focus on the opportunity Chair Powell has at Jackson Hall to regain control of the narrative and anchor forward policy guidance," El-Erian wrote.
El-Erian recommended "As to the next rate cut, the Fed definitely should wait for September IMO. An inter-meetings cut would carry a very high risk of being counterproductive."
The ongoing debate on Fed policy is focused on whether the Fed should cut inter-meetings or in September, and by how much.
It needs to go beyond this and also focus on the opportunity Chair Powell has at Jackson Hall to regain control of the narrative and anchor forward policy...
— Mohamed A. El-Erian (@elerianm) August 6, 2024
El-Erian attached his Financial Times opinion piece, where he outlined the key issues that the Fed should address during the summer to ensure the economic well-being of the U.S. and global financial stability.
These issues include the Fed's recent forecasting inaccuracies, the need for a more forward-looking policy, the urgency of a review of the 2020 revisions to the Fed's monetary policy framework, and the appropriate inflation target and neutral interest rates, according to El-Erian.
He also suggested that the Fed should consider appointing outside experts to its top policymaking committee, put more emphasis on the risk of damaging the real economy, and be more open about the risks of the current U.S. fiscal outlook.
Why It Matters: On Sunday, El-Erian noted that the probability of a 50-basis-point cut by the Federal Reserve in September had surged to 80%, reflecting traders' expectations of a more aggressive rate cut cycle. This was driven by a global market meltdown, with Asian markets falling into correction territory.
On Tuesday, speculation about an emergency rate cut before the September meeting was fueled by comments from Chicago Fed President Austan Goolsbee. However, the probability of such a cut dropped sharply from 58% to 14% within a day.
Additionally, the recent market turmoil has been partly attributed to the Bank of Japan's actions. The unwinding of the Japanese Yen carry trade led to significant losses in global markets, including the largest drop in Japan's Nikkei 225 index in decades.
安联首席经济顾问穆罕默德·埃里安建议美联储将降息推迟到9月。他还强调了即将举行的杰克逊霍尔研讨会对美联储主席杰罗姆·鲍威尔重新控制叙事的重要性。
发生了什么:El-Erian在X上的一篇文章中强调了正在进行的关于美联储政策的辩论,并建议将重点转移到鲍威尔在杰克逊霍尔研讨会上有机会指导叙事和提供前瞻性政策指导上。
埃里安写道:“它需要超越这一点,还需要关注鲍威尔主席在杰克逊霍尔获得的机会,以重新控制叙事并确定前瞻性政策指导。”
埃里安建议:“至于下一次降息,美联储肯定应该等待国际海事组织9月份。休会期间的削减会产生适得其反的风险。”
关于美联储政策的持续辩论集中在美联储是否应该在休会期间或在9月削减以及削减幅度上。
它需要超越这一点,还需要关注鲍威尔主席在杰克逊·霍尔获得的机会,以重新控制叙事并确定前瞻性政策...
— 穆罕默德 A.El-Erian (@elerianm) 2024 年 8 月 6 日
埃里安附上了他的《金融时报》观点文章,他在文章中概述了美联储在夏季为确保美国经济福祉和全球金融稳定而应解决的关键问题。
埃里安认为,这些问题包括美联储最近的预测不准确、需要更具前瞻性的政策、审查2020年美联储货币政策框架修订的紧迫性以及适当的通胀目标和中性利率。
他还建议,美联储应考虑任命外部专家加入其最高决策委员会,更加重视损害实体经济的风险,并对当前美国财政前景的风险更加开放。
为何重要:El-Erian周日指出,美联储在9月份下调50个基点的可能性已激增至80%,这反映了交易者对更激进的降息周期的预期。这是由全球市场崩溃推动的,亚洲市场跌入修正区间。
周二,芝加哥联储主席奥斯坦·古尔斯比的言论助长了人们对9月会议前紧急降息的猜测。但是,这种削减的可能性在一天之内从58%急剧下降到14%。
此外,最近的市场动荡部分归因于日本银行的行动。日元套利交易的平仓导致全球市场遭受重大损失,包括日本日经225指数数十年来的最大跌幅。