Economist El-Erian: Economic slowdown exacerbates the risk of Fed policy mistakes

June 28th, Jinshi data, Mohamed El-Erian stated that the Fed's favored inflation indicators are showing signs of weakness, highlighting the risk that the economic slowdown is magnifying the central bank's policy mistakes. 'The pace of economic slowdown has exceeded the expectations of most economists and even the Fed,' said El-Erian, president of Queens' College, Cambridge University. 'The economy is slowing down with little cushion,' El-Erian said, 'a forward-looking Fed would definitely be open to the possibility of a rate cut in July.' In contrast, the Fed 'still relies excessively on data and requires a considerable amount of historical data to change its stance.' The median of the latest forecasts released by Fed officials this month corresponds to a rate cut once this year, by 25 basis points, compared to the forecast of three rate cuts in March. The market still expects at least one rate cut this year, by 25 basis points, as early as September. The possibility of a rate cut in July is slim. El-Erian said the Fed faces the risk of keeping rates 'too high for too long.' In his view, the probability of a recession in the U.S. is 35%, while the probability of a soft landing is 50%. 'The more likely mistake at the moment is that the Fed starts cutting rates too late, leading to a rate cut eventually exceeding the appropriate level.'