El-Erian Issues 3 Year Warning on Growth or Recession

Allianz Chief Economic Adviser Mohamed El-Erian said Tuesday the world economy is at the end of the era of borrowing growth and profits from the future in the form of easy monetary policies.

“Either we validate the financial asset prices and growth faster, or alternatively we will slip into a global recession with financial disorder,” El-Erian told CNBC’s “Squawk Box.” He put a timetable of about three years on the outcome.
“The path we’re on right now — and that we’ve been on for a while— is ending,” the former Pimco co-CEO said, advocating central banks step back and allow economies to determine their own futures.

“There is nothing predestined about where we end up. We are heading toward this ‘T-junction’ and we can still take the right road,” El-Erian said.

The Federal Reserve took the first step, hiking U.S. interest rates in December for the first time in more than nine years.

But El-Erian said the Fed waited too long to begin exiting from emergency polices designed to boost the economy after the 2008 financial crisis.

“They were waiting, waiting, and waiting, and irony is that the economy has healed, but it is not unleashed,” he said.

“The notion that we’re going to get four hikes this year is divorced from reality. I think, at most, we get two,” El-Erian said, predicting a “very shallow path” higher for rates.

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