El-Erian Warns Kevin Warsh Will Have To Address A Long List Of Problems To Restore Trust In Fed
Synopsis
The economist added that the Federal Open Market Committee’s structure makes it susceptible to groupthink and that the institution has experienced mission creep.
Mohamed El-Erian, Chief Economic Advisor at Allianz, warned on Thursday that Kevin Warsh will have to address a long list of problems to restore trust in the Federal Reserve.
“The Fed has made repeated analytical and forecasting errors in recent years, as well as supervisory lapses and monetary-policy slippages,” El-Erian said in an opinion piece for Project Syndicate.
The economist added that the Federal Open Market Committee’s (FOMC) structure makes it susceptible to groupthink and that the institution has experienced mission creep.
He also highlighted that the success of the “Warsh Fed” will not be measured by the Fed funds rate alone, but by whether it includes an overhaul of the central bank's outdated operational machinery, as well as the strengthening of the underpinnings of the Fed’s balance-sheet policy.
Warsh was nominated by President Donald Trump as his Fed Chair nominee in January.
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