The US inflation rate may increase further and recession risks are “tilted in a negative way right now”, said Mohamed El Erian, chief economic adviser at German financial services company Allianz.
“I think you have got to be very modest about what we know about this inflation process,” Mr El Erian said during an interview on CBS’s Face the Nation programme on Sunday.
“And I fear that it is still going to get worse. We may well get to 9 per cent at this rate.”
The year-on-year increase in US consumer prices unexpectedly accelerated to 8.6 per cent in May, a new 40-year high that is expected to push the Federal Reserve to extend an aggressive cycle of interest rate increases.
Mr El Erian also renewed his criticism that the Fed “fell behind” on inflation and said he expects an increase of 50 basis points at this week’s rate-setting meeting.
“We are now in a period of stagflation,” Mr El Erian said, with a risk of persistent inflation that ends up tipping the US economy into recession. The best scenario would be that the Fed “regains control of the inflation narrative” and achieves a so-called soft landing, he said.
“Unfortunately, the balance of risks is tilted in a negative way right now,” he said.
However, Mr Erian cited the strong US labour market as a bright spot that’s “keeping us away from a recession right now".
"That is why a recession is a risk scenario, not a baseline,” he added.
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Watch: why is everything so expensive right now?
The President's Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
The biog
Name: Mohammed Imtiaz
From: Gujranwala, Pakistan
Arrived in the UAE: 1976
Favourite clothes to make: Suit
Cost of a hand-made suit: From Dh550
Why it pays to compare
A comparison of sending Dh20,000 from the UAE using two different routes at the same time - the first direct from a UAE bank to a bank in Germany, and the second from the same UAE bank via an online platform to Germany - found key differences in cost and speed. The transfers were both initiated on January 30.
Route 1: bank transfer
The UAE bank charged Dh152.25 for the Dh20,000 transfer. On top of that, their exchange rate margin added a difference of around Dh415, compared with the mid-market rate.
Total cost: Dh567.25 - around 2.9 per cent of the total amount
Total received: €4,670.30
Route 2: online platform
The UAE bank’s charge for sending Dh20,000 to a UK dirham-denominated account was Dh2.10. The exchange rate margin cost was Dh60, plus a Dh12 fee.
Total cost: Dh74.10, around 0.4 per cent of the transaction
Total received: €4,756
The UAE bank transfer was far quicker – around two to three working days, while the online platform took around four to five days, but was considerably cheaper. In the online platform transfer, the funds were also exposed to currency risk during the period it took for them to arrive.
The biog
Full name: Aisha Abdulqader Saeed
Age: 34
Emirate: Dubai
Favourite quote: "No one has ever become poor by giving"
U19 World Cup in South Africa
Group A: India, Japan, New Zealand, Sri Lanka
Group B: Australia, England, Nigeria, West Indies
Group C: Bangladesh, Pakistan, Scotland, Zimbabwe
Group D: Afghanistan, Canada, South Africa, UAE
UAE fixtures
Saturday, January 18, v Canada
Wednesday, January 22, v Afghanistan
Saturday, January 25, v South Africa
UAE squad
Aryan Lakra (captain), Vriitya Aravind, Deshan Chethyia, Mohammed Farazuddin, Jonathan Figy, Osama Hassan, Karthik Meiyappan, Rishabh Mukherjee, Ali Naseer, Wasi Shah, Alishan Sharafu, Sanchit Sharma, Kai Smith, Akasha Tahir, Ansh Tandon
Summer special
OPINIONS ON PALESTINE & ISRAEL
