Tags: el-erian | mistake | fed | recession

El-Erian: Only 'Major Policy Mistake' by Fed Can Spark Recession

By    |   Tuesday, 26 March 2019 06:29 PM

Investment guru Mohamed El-Erian predicts that the U.S. won’t slip into a recession this year or in 2020 as long as there’s not a “major policy mistake” from the Federal Reserve.

The remarks by Allianz’s chief economic adviser to CNBC are at odds with a growing list of economists and business elite predicting a downturn as well as warning signs from the bond market, CNBC explained.

“This economy, unless it’s disrupted by a major policy mistake, is on its way to 2.5 to 3 percent growth for this year,” the Newsmax Finance Insider and Bloomberg Opinion columnist said. “There’s no way there’s going to be a recession,” he added

He said while the U.S. central bank seemed to rule out any rate hikes for this year, investors should keep all possible options open.

“I wouldn’t give up policy optionality so early,” he said. “There’s lot of uncertainty. It’s not clear how this divergent growth is going to play out.”

However, El-Erian, former CEO and co-CIO of Pimco, sees signs that the economy actually has momentum. He said that while President Donald Trump’s 2017 tax stimulus is weakening, business investment is picking up and the labor market is strong, CNBC explained.

“We still have job creation well above what’d you expect this time in the cycle,” El-Erian said.

To be sure, the U.S. economy is growing at a 1.3 percent annualized rate in the first quarter, based on latest data on the latest housing data, the Atlanta Federal Reserve’s GDPNow forecast model showed on Tuesday.

This was faster than the 1.2 percent pace for the first-quarter gross domestic product that the Atlanta Fed’s GDP program calculated on Friday.

The economy grew at a 2.6 percent in the October-December period.

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2019 is 1.3 percent on March 26, up from 1.2 percent on March 22. After Tuesday morning's new residential construction release from the U.S. Census Bureau, the nowcast of first-quarter real residential investment growth increased from 0.6 percent to 1.3 percent.

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Investment guru Mohamed El-Erian predicts that the U.S. won’t slip into a recession this year or in 2020 as long as there’s not a “major policy mistake” from the Federal Reserve.
el-erian, mistake, fed, recession
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2019-29-26
Tuesday, 26 March 2019 06:29 PM
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