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now the president had lunch yesterday with the Senate Republicans he's trying to rally support for this tax overhaul joining me right now is Mohamed el-erian he is a Leon's chief economic adviser and Mohamed so it's a pleasure to see you thank you very much how important is tax reform getting done for the markets very important and very important that it be done as part of a package that includes deregulation infrastructure spending and also some focus on skill acquisition we need all that not only to boost actual growth but also to boost potential growth so it's very important do you think that it will move growth I think that if done in a package it will have a very positive impact on growth but it's important that the measures keep on going out that this is part of a very broad pro-growth program and that the administration and Congress can get things done so for the first time in a long time we're looking at fiscal policy versus what has been dominated by a monetary policy wherever you had the central banks of the world easing so long we've got an ECB meeting tomorrow and we got the US Federal Reserve some uncertainty there the president asked Senate Republicans yesterday who do you want to see in charge of the Fed and apparently we're being told that the majority was unanimous that they said John Taylor what would John Taylor what would a John Taylor Federal Reserve look like so it would be it would be a Federal Reserve with a very strong economist at its head and it's going to be really important to get the White vice chair as well because later because Stan Fischer has stepped down importantly I don't think that the market is correct and reacting the way it has reacted to various indication of Fed chair for simple reason that Fed policy when it comes to reduction of balance sheet and interest rate is pretty set for this next six to nine months beyond that yes but we've seen too much emphasis I think on hawkish versus dovish I think I think that the Fed is embarked on it's beautiful normalization more important is this handoff to other growth policies going back to tax reform to deregulation to infrastructure that's critical what about the ECB what do you expect the end of the ECB meeting tomorrow so if the markets were to worry about one central bank will be the ECB okay the ECB faces a very difficult situation the recovery is not as advanced as it is in the US it's trying to make policies for nineteen countries that are very different it has its own transition coming up in its leadership so don't underestimate the challenge facing the ECB tomorrow I suspect we're going to get an announcement of a gradual reduction in its purchase and they will try to make it conditional but if they make a mistake that is going to have a huge impact on our yields on the dollar and on markets is that expected in markets right now that they're gonna be gradually take it down at this point yes I think what the market expects is that they will reduce the pace of purchases by about half from 60 million to 30 million a month and that they won't do anything on interest rates and that's critical that's what the market expects and I suspect that's what the ECB will deliver so what's the risk here you got the you know usually if the ECB makers to the stake then you've got the risk of the Federal Reserve winding and it's four and a half trillion dollar balance sheet yeah these two things happening together yeah and at a time when the markets are at record highs so Maria that speaks to a fundamental issue the market has understood that one central bank can normalize in an orderly fashion what the market doesn't know is what happens if more than one central bank and remember we have potentially four central bank's the Fed the ECB the Bank of Japan in the People's Bank of China so what the marketplace is going to have to figure out is can we have more than one central bank normalize at the same time right and that's gonna be absolutely critical what do you want to do as far as allocating capital right now so I think you've got to be more Baba what do I mean by that is appreciate that we on a wonderful journey that the market has delivered great returns and widely sold but that we have run ahead of the policy implementation so if you continue on this journey remain highly liquid please make sure that you diversified in terms of market exposure and yes continue to buy the dip because I think the conditioning of the market has been so strong that we will continue to fade any correction fade correction yeah the market has been conditioned to believe that any dip is a buying opportunity right because guess what it has to be profitable so it takes a major shock to shake that conditioning well how it's great to see you thank you thank you so much for weighing in this morning by del re and joining us there come
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