Business NEWS

    News that matters

    El-Erian Warns of Premature Optimism Around US Economy


    Optimism is growing around the US economy as the stock market continues to rally and the Federal Reserve's recent communique on inflation and interest rates suggested a more dovish stance. However, top economist Mohamed El-Erian has warned that this optimism may be premature, and that the US is facing a 75% chance of inflation rebounding or remaining abnormally high this year.[0]

    El-Erian warned of a 50% probability of inflation remaining “sticky” at 3%-4%, and a 25% chance of prices bouncing back sharply and causing a “U inflation” scare.[1] He added that the Fed's 2% inflation target was “arbitrary,” and that the best way to deal with a temporary inflation scare was to simply wait it out.[0]

    Investors have priced in just a few more rate hikes before the central bank stops tightening its policy, and the S&P 500 has extended its 2023 gains to almost 9%.[1] A less aggressive Fed could reduce the potential severity of the widely anticipated US economic slump and be less damaging for corporate earnings and valuations.[2]

    But El-Erian has warned that the optimism may be misplaced and that the Fed could end up crushing the economy as it struggles to rein in soaring prices.[1] His warning echoes the views of other bearish commentators, who have warned that inflation may not be over just yet and could flip the stock market upside down.[1]

    0. “Inflation has a 75% chance of rebounding or remaining high, top economist warns” Fox Business, 10 Feb. 2023,

    1. “Inflation has a 75% chance of rebounding or staying high, and the Fed could crush the economy in its attempt t” Business Insider India, 9 Feb. 2023,

    2. “Top economist Mohamed El-Erian says markets are embracing a ‘soft landing' scenario, with US 2-year bond yield” Business Insider India, 3 Feb. 2023,

    Leave a Comment

    This div height required for enabling the sticky sidebar