El-Erian 'Terrified' of Central Banks Losing Autonomy

 7,713 views Apr 14, 2023

"I am terrified that if central banks don't own their mistakes...people are going to say 'You're not accountable enough,'" Mohamed El-Erian, a Bloomberg Opinion columnist, says during a panel discussion in Washington. El-Erian's opinions are his own.

“I am terrified that if central banks don't own their mistakes, if central banks don't learn from their mistakes and are public about this process, people are going to say 'You're not accountable enough, and I'm not sure you should have the amount of political autonomy that you do',” El-Erian said Friday during a panel ...14 hours ago

El-Erian Terrified of Central Banks Losing Autonomy Over Errors

 

Central banks risk losing their autonomy if they're not ...

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5 hours ago — Central banks risk losing their autonomy if they're not publicly accountable over past mistakes, Mohamed El-Erian warns.

El-Erian Terrified of Central Banks Losing Autonomy Over Errors

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Philip Aldrick and Sam Kim

Fri, April 14, 2023 at 10:37 AM MST·2 min read

El-Erian Terrified of Central Banks Losing Autonomy Over Errors

(Bloomberg) -- Central banks risk losing their autonomy if they’re not publicly accountable over past mistakes, including playing down the risks of inflation that has punished consumers and hurt economies, Mohamed El-Erian warned.

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Central banks, particularly the Federal Reserve, have been criticized for being too slow to spot surging inflation in 2021 as the world reopened from pandemic lockdowns. They’ve since scrambled to catch up by aggressively raising interest rates, even at the risk of triggering a potentially painful recession.

“I am terrified that if central banks don’t own their mistakes, if central banks don’t learn from their mistakes and are public about this process, people are going to say ‘You’re not accountable enough, and I’m not sure you should have the amount of political autonomy that you do’,” El-Erian said Friday during a panel discussion in Washington.

“Operational autonomy is absolutely central, is absolutely critical, to central banks,” he said.

El-Erian, chief economic adviser at Allianz SE and Bloomberg Opinion columnist, said the market doesn’t trust the Fed’s forward guidance on interest rates. “The marketplace itself is doubting the Fed,” he said.

Investors are betting US interest rates will ease to about 4.5% by the end of the year, according to futures pricing. The median forecast from Fed officials in March was 5.1%.

Gita Gopinath, first deputy managing director of the International Monetary Fund, said central banks need to be agile when providing forward guidance on the direction of rates or the size of balance sheets.

“While forward guidance is great in the sense of providing a lot of commitment” and certainty, there’s a trade-off “because sometimes it really ties your hands,” she said, speaking on the same panel, hosted by Bloomberg Television’s Tom Keene at the International Monetary Fund’s Spring Meetings.