Economist Mohamed El-Erian Expects Core Inflation to Continue Rising

Core inflation will continue to rise but expect headline inflation to come down, Allianz Chief Economic Adviser Mohamed El-Erian said Sunday.

“Headline inflation will probably come down to about 8 percent. But core inflation, what measures the drivers of inflation and how broad they are is still going up,” said El-Erian while appearing on CBS’s Face The Nation.

Core inflation covers all goods and services that are included in the consumer price index except for food and energy prices, which are included in headline inflation.

El-Erian, who is also the president of Queens College in Cambridge, noted that while he does expect inflation to go down at some point, he questioned whether “it come[s] down with a slowdown in the economy or a major recession?”

The economist also stated Sunday he believes the Federal Reserve made two major mistakes that were “totally avoidable” when handling inflation.

Fifty-six percent of Americans say President Joe Biden’s 40-year-high inflation has caused them hardship, up from 49 percent in January and 45 percent in November, a Gallup poll found this week. https://t.co/5axxAh8o9s

— Breitbart News (@BreitbartNews) September 10, 2022

“One is mischaracterizing inflation as transitory. By that, they meant it is temporary, it’s reversible, don’t worry about it,” he said

For mistake number two, El-Erian noted that when the Fed “recognized” that inflation was becoming a problem, they did not take any meaningful action.

As a result of not taking any preventive measures, El-Erian believes the Fed is at risk of making another major mistake.

“[B]y not easing the foot [off] the accelerator last year, they are slamming on the brakes this year, which would tip us into recession,” the economist told host, Major Garrett.

Yesterday's catastrophic inflation report stunned the Biden White House and forced them to spin like tops with just 54 days to go until working class Americans who are struggling to stay afloat head to the polls. https://t.co/fyRaMBMFtF

— Breitbart News (@BreitbartNews) September 14, 2022

Despite El-Erian’s assessment that the U.S. is heading into a recession, the economy has already contracted for two consecutive quarters this year — which is one popular definition of a recession.

Inflation under the Biden administration has jumped by 8.3 percent since last year. Grocery prices have increased by 13.5 percent, while gasoline prices have hiked by 25.6 percent.

You can follow Ethan Letkeman on Twitter at @EthanLetkeman.