Congress needs to hold the Fed more accountable as the central bank chases an outdated inflation target, says Mohamed El-Erian
has shot above 4.7%, hitting the highest since July 2007 as well as the upper bound of the federal funds target range of 4.5%-4.75% set by monetary policy makers, according to Tradeweb.
El-Erian, chief economic adviser at Allianz and president of Queens' College in Cambridge, said the Fed's inflation target is too low and yet hard to revise"given that the world's most important central bank has already undermined its credibility." "Congress needs to help: first, by enhancing Fed accountability and requiring it to update its policy framework, as well as follow the example of the Bank of England in structurally inserting outside views in its policy formulation process; and second, by formulating a more comprehensive approach to easing supply side constraints," he wrote. has dismissed the idea of changing the 2% inflation target.
Meanwhile, the Fed is expected to raise interest rates again at its March 21-22 meeting. Talk in the markets is bubbling up about the possibility policymakers may raise rates by 50 basis points, ratcheting up from the prior increase of 25 basis points.
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