The Fed's 'play-by-play commentary' imposes unnecessary volatility into markets: Mohamed El-Erian

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Fed가 연준 위원 19명의 잦은 발언으로 play-by-play 코멘터리가 되어 시장 변동성을 불필요하게 키우고 있다고 비판. 과도한 데이터 의존은 노이즈에 휘둘리게 만든다고 주장. 그럼에도 Fed는 올해 두 번 금리 인하를 해야 한다는 입장. 인플레이션 마지막 구간은 공급측 문제로 Jamie Dimon처럼 어려울 것이며, 2%보다 약간 높은 수준을 허용해야 경제를 희생하지 않는다고 봄. 재정 적자 문제도 언급하며 Fed가 이를 고려하면 안 된다고 함. Larry Summers의 중립금리 불확실성 기반 관망론에는 반대.

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01. our next guest says the FED has lost sight of its overall strategy has instead turned into a play-by-play commentator still he expects the FED to cut rates now he says twice this year for more on that and his take on the treasury secretary uh sitting at the same chair that Joe kernin sits but always this time I think with a different opinion Muhammad aleran here chief economic adviser at allance and uh play-by-play commentator that's s of kind of harsh you're not usually like that well it's because of the amount of volatility they've put into the marketplace the FED should be the Strategic anchor to this market and leave the play to play commentary to others what we found is with 19 Federal officials speaking we have they've become a play play-by-play commentator and we've saw last week what that does to Market it it imposes an unnecessary amount of volatility onto it it's cuz we feel like we're at an inflection point right this is um it's one thing for everybody to be talking when we kind of know the direction of things but I think everybody's looking for any que anywhere to try and figure out what the Feb will do next cuz it's it's just unclear yeah and there's a couple things going on one I think the whole notion of transparency is being implemented in the wrong way I'm all full transparency but it has to be in a way that does that fulfills the the objectives of transparency but nobody's allowed to talk no do talk but talk with a longer term view don't talk on every single change and the other thing is this fed unfortunately has become excessively data dependent and when you become excessively data dependent you start being swung around by the data you know there's an old image there shouldn't you be excessively dependent on the data shouldn't that be the whole game no high frequency data tends to be incredibly noisy so if you're excessively data dependent the image you have is of a roller coaster the market the data The High Frequency data on a roller coaster and the FED has two choices either to get onto the roller coaster or stay on the side and try to provide the anchor so your argument was that is that they should do nothing right now and kind of wait it out and see where the data heads or no no if you take a strategic view of the economy they should definitely cut twice if you are overly data dependent you're going to be taken to a place where you may end up not cutting and that's going to be the difference and if you don't cut that may un unnecessarily undermine US economic exceptionalism let me read you Muhammad uh this is Jamie Diamond's letter came out this morning and he says many economic uh indicators today continue to be good and possibly improving including inflation when looking ahead to tomorrow conditions that will affect the future should be considered for example there seems to be a large number of persistent inflationary pressures which may likely continue all of the following factors appear to be inflationary ongoing fiscal spending remilitarization of the world restructuring of global trade Capital needs in the new green economy and possibly higher energy costs in the future even though there currently is the oversupply of gas and plentiful spare capacity of oil due to the lack of needing investment in the energy infrastructure what do you make of that I think Jamie Diamond is absolutely right I think that the last mile so-called in the inflation battle is going to prove much more difficult than most Market participants expect because of the reasons he cited we live now in a world where the supply side is a problem not the demand side the big debate is does that mean the FED should pursue a 2% inflation Target regardless of the change in the global macro Paradigm or in my view it should be to tolerating slightly above 2% in order not to sacrifice the economy so if you do no Cuts right what happens what happens to the economy and by the way there's the economy but then there's the impact that all this government debt that we have is going to ultimately have on the economy correct there's a huge fiscal issue that we don't talk about enough there's a huge structural reform issue that we don't talk about enough we are too focused on the fed and on inflation but no no what I'm saying is should the FED be even thinking about the fiscal issue which is to say that the cost of our debt is going to become a problem very soon if it isn't already but if they start thinking about that then they're basically enabling the fiscal authorities to continue doing that if they're cutting rates to make sure that we don't get out of hand with those things correct and and they shouldn't be thinking about it whether they do or not I don't know but they shouldn't be thinking about it what they should be thinking about is the Dual dual mandate and what is the right inflation Target or if you want to be sort of more diplomatic when do you want to get to 2% do we need to get to 2% quickly or can we need can we get over the medium term and if you not notice a very important descriptor has come into whenever they talk about 2% they say the longer term objective of Larry Summers has been pretty critical too he is saying they shouldn't do anything right now because we can't even decide on what a neutral rate is I just heard saying that if if you don't know what the neutral rate is that's like driving a car and not knowing what your what Your speedometer says uh you know like you just don't know how fast this economy should be running at this point and that's a reason for doing nothing yeah Larry reacted quite quite violently to the comments of chair po last week yeah when chair pal said we don't know where our start is and Larry's Point which is correct is well you better have some view as to where our start is again that is an illustration of a that's two data dependent that is not looking at the Strategic element of course you have to have a view of where our star is that's so critical 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