A chief economic adviser says the recession the US is about to enter was 'totally avoidable'

"That is the cost of a Federal Reserve being late. Not only does it have to overcome inflation, but it has to restore its credibility."

Updated: October 9, 2022 - 3:58pm

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Allianz’s chief economic adviser Mohamed El-Erian said on CBS's "Face the Nation" on Sunday that the upcoming United States recession was avoidable. 

"I fear that we risk a very high probability of a damaging recession that was totally avoidable," El-Erian said during the CBS "Face the Nation" interview.

"One is mischaracterizing inflation as transitory," he continued. "By that, they meant it is temporary, it's reversible, don't worry about it. That was mistake number one. And then mistake number two, when they finally recognized that inflation was persistent and high. They didn't act. They didn't act in a meaningful way."

El-Erian was referring to when the Biden administration called inflation "transitory" in the summer of 2021. In July of 2021, President Biden referred to the inflation as temporary, according to Fox News.

The United Nations has warned of a global recession as countries strive to lower inflation. According to The Hill, the Fed is currently raising interest rates to slow down the economy and drive down inflation. 

"Even [Federal Reserve] Chair Powell has gone from looking for a soft landing to soft-ish landing to now talking about pain," El-Erian stated during the interview.

"And that is the problem," he continued. "That is the cost of a Federal Reserve being late. Not only does it have to overcome inflation, but it has to restore its credibility."

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