The worst thing the Federal Reserve can do now is cut interest rates, top economist Mohamed El-Erian says
Markets have been upping bets that the Federal Reserve will cut interest rates as soon as this summer as the economy deals with stress from the banking crisis, but that's actually the worst thing the central could do at this point, according to top economist Mohamed El-Erian.
And despite recent banking turmoil stemming from the collapse of Silicon Valley Bank, it would be a mistake to dial back rates to ease banking stress. El-Erian pointed to recent comments from, who said interest rates are primarily a monetary policy tool to control inflation, as there are other policy tools used to control financial stability.
Interest rates are the highest they've been since 2007, with the Fed funds rate falling between a range of 4.75-5%. Central bankers were forced to raise interest rates aggressively last year to tame inflation, as they mistakenly brushed off rising prices as"transitory" in 2021, causing them to tighten monetary policy too later.
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