El-Erian: Markets front-run Fed in tightening financial conditions
Inter-American Development Bank President Luis Alberto Moreno (L) and Allianz Chief Economic Advisor Mohamed El-Erian during the Bretton Woods Committee annual meeting at World Bank headquarters in Washington in this May 21, 2014 file photo. REUTERS/Jonat
By Jennifer Ablan
NEW YORK (Reuters) - Mohamed El-Erian, the chief economic adviser at Allianz SE
"I doubt we will see the four rate hikes signaled a few weeks ago by Fed officials," El-Erian said. "Two hikes are likely, if not less."
William Dudley, president of the Federal Reserve Bank of New York, said on Wednesday that financial conditions have tightened considerably in the weeks since the Fed raised rates. He added that policymakers will take that into consideration if the phenomenon persists. So far this year, the benchmark Standard & Poor's 500 Index <.SPX> is down 6.31 percent.
"The Fed signaled that it is now hostage to international developments and markets," El-Erian said regarding the Federal Open Market Committee's latest statement in January.
"The Fed signaled that the outlook was so uncertain, or to use (former) chairman (Ben) Bernanke's phrase, 'so unusually uncertain,' that it wasn't in a position to comment on the balance of risk. That's quite a big signal coming from the central bank."
El-Erian said the Fed could possibly opt for no hikes this year. About the Bank of Japan's surprising move to negative rates, El-Erian said: "Over the longer-term, financial markets will again question whether central banks are the only game in town."
(Reporting by Jennifer Ablan; Editing by Chizu Nomiyama and Matthew Lewis)
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Durable Goods (Mar P) 2.6% vs 2.5% Expected, Ex-Trans 0.2% vs 0.2%
- Dollar calm ahead of week's key data; euro gains after PMI release
- Dollar flat ahead of key inflation release; Middle East tensions ease
Create E-mail Alert Related Categories
Fed, Forex, ReutersRelated Entities
Ben S. Bernanke, Federal Open Market Committee, Mohamed El-Erian, William DudleySign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!