Mohamed El-Erian, a well-known economist and president of Queens College in Cambridge, made several statements regarding the current economic situation in the US, including the dismissal of the BLS head and the future of the Federal Reserve.
Fed Rate Cut Prospects
El-Erian noted that the Fed would have likely cut interest rates if it had known about the July employment revisions in advance. He emphasized that current market conditions reflect a weakening economy. In particular, he pointed to a significant decline in spending by low-income households, which is also visible in corporate reports. Expectations for interest rate cuts in the US bond market have reached 90%, almost guaranteeing a reduction of at least 25 basis points in September.
Critique of Bureau of Statistics Dismissal
The economist criticized the dismissal of the president of the Bureau of Statistics, arguing that this step undermines the institutional integrity of economic data production in the US. He stated, "Such dismissals undermine trust in the impartiality of statistical institutions. This poses a serious problem for market confidence."
Potential Candidates for Fed Chair
El-Erian also shared his views on potential candidates for the new Fed Chair, mentioning Kevin Hassett and Kevin Warsh as positive options for enhancing the Fed's independence. He noted that the current pressure on Fed Chair Jerome Powell could undermine the institution's independence.
Mohamed El-Erian raises important questions about the stability of the US economy and the role of the Federal Reserve. The dismissal of the Bureau of Statistics head and expectations for interest rate cuts remain in focus for economists and financial analysts.
