Count El-Erian Among Those Calling For A Fed Rate Hike Sooner Rather Than Later

Mohamed El-Erian is among those that believe the Federal Reserve needs to reassess its position of keeping interest rates low.

“The Fed needs other policy makers to step up to their responsibility,” he said in a Bloomberg interview, talking about Stanley Fischer’s speech.

What Fischer’s words revealed is that the Fed is as concerned about structural problems as it is about cyclical issues – and this balance is something to look at in Yellen’s speech this Friday. The “more hawkish” remarks out of Fed officials prove that many investors had been underestimating the chances of seeing a rate hike this year.

Related Link: Consensus For A Rate Hike Slowly Building: Here Are Implications For The Dollar, Stocks

When asked about the impact of the Fed policy over financial markets, El-Erian explained that such dovishness and the upkeep of low rates could result in market distortions. This could lead to financial stability somewhere down the road, he added. And, this is probably the strongest argument he sees to justify a gradual normalization of rates.

“Otherwise you contribute to excessive risk taking,” to reckless bond trades in the search for better yields than those offered to savers.