“I think the Fed is losing credibility,” Mohamed El-Erian, chief economic advisor at Allianz, told CNBC on Monday.
“We are in this transition of central banks mischaracterizing inflation. The repeated narrative: ‘It is transitory, it is transitory, it is transitory.’ It is not transitory,” El-Erian said.
He said that there are “behavioral changes going on” that could cause inflation to “last for a while”.
El-Erian suggested that the Fed should accelerate the pace of tapering of its bond purchases and start preparing people for higher interest rates.
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