Fed and ECB still behind the inflation curve

Financial Times/Mohamed El-Erian/2-6-2022

graphic illustration of a a hawk and dove in flight“Some market commentators have characterised this as a ‘hawkish pivot.’ If it is a pivot, it is partial at best, still too slow and risks an over-compensation later this year. Currently, the two banks’ extremely accommodating policies are inconsistent with both their change in language on inflation and developments on the ground.”

USAGOLD note: In short, what is hawkish to some is dovish to others. El Erian sees the Fed hawkish tone as dovish in reality, which translates to higher inflation down the road. He says its positioning amounts to the “second policy mistake in as many years” – the first being the insistence that inflation was transitory for so long.

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