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According to economist Mohamed El-Erian, the Federal Reserve failed to slow down its aggressive rate hikes in time, and now that a series of banking crises is mounting, the credibility of the central bank is under threat. An advisor to Allianz and Gramercy said he sees the recent crisis in the banking sector as a confluence of three different factors. “One of them is a series of bank management problems and oversight lapses,” El-Erian said Wednesday on CNBC’s Squawk Box. “Then, taking a step back, we recognize that both the private sector and the public sector have not adjusted enough to what was the wrong change in monetary policy regimes.” He said the third element is that the Fed’s “jumping” between higher and lower interest rate hikes has contributed to recent market volatility. “The recent Fed spikes have added interest rate volatility to a situation that already had economic and financial volatility … and the stock market is understanding what the bond market has understood over the past few days, [which] is that it is not just one or two institutions. What we have seen in one or two institutions reveals much more that we need to reiterate, including that banking is changing because of what is happening right now,” El-Erian said. to a record low in trading on Wednesday The massive sell-off came after a Swiss bank, already hit by a series of regulatory scandals, said its biggest investor, the National Bank of Saudi Arabia, could not provide it with further bailouts. The news resumed the collapse in US bank stocks, which began last week with problems at Silicon Valley Bank and Signature Bank. As the Federal Reserve continues to digest new economic data showing where it is in the fight against inflation, El-Erian believes that confidence in this institution is at a low level. bet after she “didn’t slow down in time [and] hit the brakes.” “What the Fed has failed to do is take a step back and look at the whole situation. He is in captivity of an outdated monetary system,” El-Erian said. We had what I think [a] the capture of the financial sector by monetary policy over the past few years and that’s why we’re in this mess.”
Credit: www.cnbc.com /
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