El-Erian Thinks Fed Will Remove “Considerable Time” From Statement

Former Pimco co-CEO Mohamed El-Erian told CNBC on Wednesday he believes the Federal Reserve will drop the “considerable period of time” phrase, a reference to how long policymakers intend to keep rates low.

“You’ve got to remove the wording to move on rates in the middle of next year,” El-Erian said on “Squawk Box” ahead of the the Fed’s final policy statement of the year. “The Fed has tried to be transparent. It cannot leapfrog immediately to a rate hike.”

El-Erian, chief economic advisor at Pimco-parent Allianz of Germany, predicted the Fed will start hiking rates in the middle of next year, as many on Wall Street are expecting.

“There’s the risk of low inflation but against that, the economy is growing more broadly and it’s time to take some of the stimulus out of the market and allow the market to stand on its own feet,” he said.
In addition to concerns about the Fed, investors have been increasingly worried about plunging oil prices and Russia’s currency collapse.

“In the case of Russia, this is a classic emerging market crisis. It feeds on itself. It’s going to lead to recession, inflation, capital flight, and the risk of further financial instability. But it’s not 1998,” when a currency crisis caused Russia to default on its debt, El-Erian said.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza