01:46 PM
Monday 13 June 2022
I wrote – Yasmine Selim:
While the rate of inflation in America was slowly creeping upwards in the summer of last year, one person was warning that the high inflation is going to be long and the policy of the US Federal Reserve is a little late.
This person is the American with Egyptian origins, Mohamed El-Erian, chief economic advisor at Allianz.
Al-Arian warns again, after inflation in America and the world has jumped over the past months, that we have not yet reached the peak of inflation and that the US Federal Reserve has to make a choice and stick to it, but this time everyone is listening to him.
blue eyed of Yamamah
Last July, Al-Arian played the role of Zarqa Al-Yamamah, who was seeing what might happen before it happened, while he was a guest on Bloomberg TV and warned that inflation in America would not be temporary, at a time when Jerome Powell, Chairman of the Federal Reserve and the rest of the board believed that Inflation is temporary.
The inflation rate in America at the time reached 5.4% during June 2021, inflation continued to rise month after month until it reached 8.6% last May, the highest rate since 1981.
The Ukraine war contributed to the rise in commodity prices globally, but the price hike in America was on the rise before the outbreak of the war to put more pressure on inflation.
Al-Arian was building his point of view last July on information from American companies that raised their prices and expect more price increases, which contributes to the rise in inflation.
He told Bloomberg TV at the time that his previous forecasts for economic events proved correct in the long run.
In 1999, El-Arian expected Argentina to default on its debts, which happened two years later, and also expected that Brazil would not default on its debts, which has already happened, according to Bloomberg.
To confront the continuation of inflation, Al-Arian advised last July the US Federal Reserve to reduce its monthly purchases of bonds in order to stop pumping liquidity into the market to control inflation. %.
El-Erian believes that what the Fed did was a mistake in monetary policy, because it did not raise rates and cut its balance sheet on buying bonds early and came some time late.
continuous inflation
These days, Al-Arian warns that inflation in America has not reached its peak yet, although it has reached its highest rate in nearly 40 years.
He told Bloomberg TV that inflation in June on a monthly basis will be worse than last May, noting that whoever was saying that inflation has reached its peak may have to change his mind.
Two days ago, El-Erian told CBS News that the “darkest” scenario is if inflation continues and we end up in a recession, “it would be tragic if it happened because it’s the most vulnerable segment of the population that will be hurt.”
While the most optimistic scenario would be that the Federal Reserve regains control of inflation, which leads to a “soft landing”, meaning that inflation will decline without harming growth rates.
These days, when Al-Arian is a permanent guest on the most famous global economic programs and paragraphs, and every time the interviewer reminds him that he was the only one who predicted the continuation of inflation a year ago, which justifies continuing to listen to him and his expectations.