Central banks around the world will continue stimulating their economies in ways that won’t bring desired results, as harmful side effects may arise, said Mohamed El-Erian, CEO of fund giant Pimco.

The Federal Reserve is carrying out its third round of quantitative easing (QE), under which the U.S. central bank buys securities, mortgage debt namely, held by banks, pumping the economy full of liquidity in a way that pushes down interest rates to spur recovery.

The previous two rounds of QE, in tandem with a steadfast commitment to keep interest rates near zero, have weakened the dollar, pumped up stock prices and have kept the financial system awash in liquidity, which many fear will stoke inflationary pressures down the road.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

Central banks around the world have carried out similar measures in varying degrees of intensity, but don’t expect them to lighten up as long as policymakers refuse to make necessary, but often politically unpopular, fiscal reforms involving taxes and spending to restore health.

“Given the trio of imperfect policy measures, weak transmission mechanisms and the lagging reaction of other policymaking entities, we should expect these central banks to remain unusually active and imaginative. Indeed, under current leaderships, we should have little doubt about their willingness to do even more,” El Erian said at an event hosted by The Economist.

“And companies, households and investors should incorporate this in their assessment of the outlook. But they should not automatically and fully map willingness to policy effectiveness.”

Monetary policy won’t improve the underlying health of the world’s major economies without reforms to taxes and spending, though many politicians are putting off such decisions.

Greece has asked for a two-year extension to meet deficit-reduction targets, while in the United States, lawmakers have avoided dealing with both short-term and long-term fiscal issues that continue to drag on the economy.

At the end of this year, the Bush-era tax cuts and other tax breaks are set to expire at the same time automatic cuts to government spending kick in, a combination known as a fiscal cliff that could send the economy sliding into a recession if left unchecked by Congress.

Lawmakers have suggested waiting until after the elections to tackle the problem, though many businesses have put off expanding and hiring in the meantime on the grounds they don’t know how much they will be paying in taxes next year.

In the meantime, expect central banks to carry the weight of steering their respective economies away from decline on their own despite the potentially inflationary side effects.

“The longer central banks are left carrying the bulk of the policy burden, the more likely that the intended benefits of their actions will be countered — first partially and then fully — by collateral damage and unintended consequences,” El-Erian said, according to prepared remarks from his speech.

“And with time, these could go from being qualifiers to baseline strategies, to becoming major influences.”

The Fed’s latest round of easing, dubbed QE3 by the markets, sees the Fed buying $40 billion in mortgage debt a month to spur recovery.

Unlike the past two rounds, which came with a limit, QE3 will run on an open-ended basis; QE1 saw the Fed buy $1.7 trillion in mainly mortgage securities from banks, while QE2 saw the Fed snap up $600 billion in Treasury holdings.

A Bloomberg survey of 60 economists found that 68 percent feel the Fed will keep QE3 going through the end of next year, right before Bernanke’s term ends in January of 2014.

The survey also found that only 51 percent feel the measure will help boost employment.

“The recovery in the labor market is probably going to be more sluggish than the Fed recognizes,” said Michael Hanson, senior U.S. economist at Bank of America and a former Fed economist, according to Bloomberg.

Policymakers have “painted themselves in a bit of a corner, waiting to see a significant improvement in the labor market.”

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible