Mohamed A. El-Erian: "With the economy under such pressure, the continued co-option of the Fed by markets risks fuelling more criticism that the central bank cares much more about Wall Street than Main Street and much more about the rich, who disproportionately own financial assets, than the less-fortunate segments of society."
HAVING surprised markets with extraordinary credit easing, the Federal Reserve was hoping for a quieter period in which reduced financial volatility would allow for more of the heavy lifting to be shifted to other policy makers and markets. Instead, in a repeat of a too-familiar pattern, the markets are asking for more.
Forward-looking indicators have been flirting with the possibility of negative interest rates by the end of this year or the beginning of next year. This is happening despite repeated statements by Fed officials that negative rates are unlikely and undesirable – and for good reason.
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