Market Overview

El-Erian On Interest Rate Hikes: One Is 'Certain,' Two Is A 'Maybe'


Allianz's chief economic adviser was a guest on "Bloomberg Markets" to discuss the likelihood of one or more Fed rate hikes this year.

According to data collected by Bloomberg, there is a 47 percent probability of a Fed rate hike in the December meeting. At the same time, Bloomberg's data does not show a single Fed meeting that has a more than 50 percent likelihood of announcing a rate hike.

Related Link: Weakest Jobs Report In 7 Months Puts Rate Hike At Serious Risk

El-Erian took the contrarian view and suggested there will "certainly" be one rate hike and "maybe" two. He noted the Federal Reserve has a good opportunity to implement a rate hike given the "relatively calm" status of the financial markets and the depreciation in the US dollar.

"When the Fed looks at whether to hike or not, it looks at the famous equation that Ben Bernanke set out in 2010: it's about benefits, costs, and risks," El-Erian said. "And you have to take all three into consideration."

El-Erian continued that several central banks across the world, particularly the Bank of Japan, are "getting closer to the line that separates effective monetary from not just ineffective monetary policy but counter-productive monetary policy." He added that Japan is sending a "warning" to other central banks to be "careful not to overdo it in terms of unconventional policies."

Posted-In: Allianz Bloomberg Bloomberg View CNBC Fed rate hikePolitics Media General


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