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.
安聯首席經濟顧問穆罕默德·埃裏安建議聯儲局將減息推遲到9月。他還強調了即將舉行的傑克遜霍爾研討會對聯儲局主席傑羅姆·鮑威爾重新控制敘事的重要性。
發生了什麼:El-Erian在X上的一篇文章中強調了正在進行的關於聯儲局政策的辯論,並建議將重點轉移到鮑威爾在傑克遜霍爾研討會上有機會指導敘事和提供前瞻性政策指導上。
埃裏安寫道:“它需要超越這一點,還需要關注鮑威爾主席在傑克遜霍爾獲得的機會,以重新控制敘事並確定前瞻性政策指導。”
埃裏安建議:“至於下一次減息,聯儲局肯定應該等待國際海事組織9月份。休會期間的削減會產生適得其反的風險。”
關於聯儲局政策的持續辯論集中在聯儲局是否應該在休會期間或在9月削減以及削減幅度上。
它需要超越這一點,還需要關注鮑威爾主席在傑克遜·霍爾獲得的機會,以重新控制敘事並確定前瞻性政策...
— 穆罕默德 A.El-Erian (@elerianm) 2024 年 8 月 6 日
埃裏安附上了他的《金融時報》觀點文章,他在文章中概述了聯儲局在夏季爲確保美國經濟福祉和全球金融穩定而應解決的關鍵問題。
埃裏安認爲,這些問題包括聯儲局最近的預測不準確、需要更具前瞻性的政策、審查2020年聯儲局貨幣政策框架修訂的緊迫性以及適當的通脹目標和中性利率。
他還建議,聯儲局應考慮任命外部專家加入其最高決策委員會,更加重視損害實體經濟的風險,並對當前美國財政前景的風險更加開放。
爲何重要:El-Erian週日指出,聯儲局在9月份下調50個點子的可能性已激增至80%,這反映了交易者對更激進的減息週期的預期。這是由全球市場崩潰推動的,亞洲市場跌入修正區間。
週二,芝加哥聯儲主席奧斯坦·古爾斯比的言論助長了人們對9月會議前緊急減息的猜測。但是,這種削減的可能性在一天之內從58%急劇下降到14%。
此外,最近的市場動盪部分歸因於日本銀行的行動。日元套戥交易的平倉導致全球市場遭受重大損失,包括日本日經225指數數十年來的最大跌幅。