By the end of the year, the Fed will choose between the economy and its inflation target, Mohamed El-Erian said.
The central will decide if it can tolerate inflation at 3% or higher — above its 2% target.
Or the Fed will choose to "crush" the economy to reach its long-standing goal, he told CNBC.
"The Fed at the end of the year is going to have a choice: You live with 3% or higher inflation, or your crush the economy," he said, adding that he hopes the Fed doesn't crush the economy.
Though central bankers are officially aiming to lower inflation to a 2% long-run target, doing so could spark a severe downturn for the US economy, El-Erian has previously warned.
Persons:
Mohamed El, Erian
Organizations:
CNBC, Service, Reserve, Allianz, New York Fed
Locations:
Wall, Silicon, El