The Federal Reserve won’t be able to get US inflation down to its 2% target without “crushing the economy,” economist Mohamed El-Erian warned on Friday, but he said the central bank is unlikely to officially change that goal post.
“You need a higher stable inflation rate. Call it 3 to 4%,” El-Erian, the chairman of Gramercy Funds and a Bloomberg Opinion columnist, told Bloomberg Television. “I don’t think they can get CPI to 2% without crushing the economy, but that’s because 2% is not the right target.”
His comments come after government data this week showed US consumer prices, or CPI, rose 0.5% in January, the most in three months, and the annual inflation rate came in at a higher-than-expected 6.4% Following the report, a raft of Fed officials said the central bank may need to raise interest rates higher than expected to try and squelch persistent price pressures.