The Fed will be making a big mistake if it skips a rate hike this week, top economist Mohamed El-Erian warns
– would allow the central bank to observe another six weeks of economic data before deciding whether to press ahead with or pause its war on inflation.
But former PIMCO co-CIO El-Erian slammed the idea of a skip, warning that it's likely the Fed will learn little about how its efforts to tame soaring prices are faring between now and its next meeting, slated to start on July 25. "An additional month of data is unlikely to significantly enhance the Fed's understanding of the effects of a policy tool that acts with variable lags," he wrote.
"Recent data favours a hike for a central bank that has repeatedly insisted that it is 'data dependent'," El-Erian said, likely referring to economic releases including May's jobs report, which signaled thatRather than skipping a rate hike, the Fed should either raise borrowing costs again or signal that it's pausing its tightening campaign while adopting a new inflation target of between 3% and 4%, El-Erian added.
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