- El-Erian believes this CPI report will show inflation coming down, but sees risks of inflation remaining sticky or accelerating in the next 3 months.
- Drivers of sticky or accelerating inflation could include further disruptions to supply chains, limited additional goods disinflation along with above target services inflation, and less favorable base effects.
- Believes the time the fed is comfortable waiting to return to 2% will be critical. In the event that the fed targets returning inflation to 2% within a year, the economy could face a hard landing.
- Referred to 2 key debates among economists: First, there is a debate as to the extent to which moderating inflation reduced inflation, secondly there is a debate as to whether real rates are the appropriate measure of whether rates are restrictive.
- El-Erian believes the fed will begin cutting rates by the middle of 2024 and cut 75bps by the end of the year. He warned that a recession is likely if the fed does not begin cutting rates.
