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Nomura economists expect the Fed to cut interest rates by 0.25 percentage points next week. That's because bond prices and yields have an inverse relation, so when interest rates drop, prices bond prices tend to go up, which could alleviate losses. The Fed hiked interest rates eight times over the past year to its targeted levels of 4.5% to 4.75% now. On Sunday, investment banking giant Goldman Sachs said it doesn't expect the Fed to hike interest rates at its next meeting. The investment banking giant was previously expecting the US central bank to hike the rate by 0.25 percentage points.
There's a risk the economy can be stuck in a period of stagflation — sluggish growth and high inflation —on the heels of Silicon Valley Bank's collapse, economist Mohamed El-Erian said Monday. The central bank has been hiking rates for the past year in an effort to tame inflation. El-Erian, chief economic advisor at Allianz, said the Fed should continue on its path and increase rates by another 25 basis points. El-Erian believes it's possible the Fed may, in fact, hold off, but said there are no more perfect policy reactions available for the central bank. "When you hit the brakes you risk both economic and financial accidents and we just lived through a financial accident."
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailMohamed El-Erian on SVB fallout: Depositors are fine, there's no need to worry anymoreMohamed El-Erian, Allianz and Gramercy advisor and president of Queens' College, Cambridge, joins 'Squawk Box' to discuss his thoughts on the backstop provided to SVB, if other banks will have similar issues as SVB, and much more.
On tap today we've got a great interview with a top real estate economist and this week's best markets stories, including updates on the Silicon Valley Bank meltdown. Nadia Evangelou: What we see in the data is that the housing market will likely pick up in the coming months, in the spring season. NE: It seems that homesales activity has bottomed out, and 2023 will be the turning point for the housing market. Due to low inventory, even though there are relatively few buyers on the market, housing demand continues to outpace housing supply. We expect 4.5 million homes to be sold in 2023, and about 5.3 million homes to be sold in 2024.
Cratering Silicon Valley Bank's troubles could be the first sign of a new financial crisis. While some say the US banking system is solid, others think this could be the first sign of a new financial crisis. Well, and highlighting the current economic/financial/policy fluidity, we have something: banking system worries," El-Erian said on Twitter. Silicon Valley Bank going under would be exponentially worse. Activist Investor Ryan Cohen"Does this mean I don't have to pay back Silicon Valley Bank?"
SVB Financial's share plunge is dragging on major bank stocks like JPMorgan and Bank of America. Here's everything you need to know about Silicon Valley Bank and its parent company SVB Financial. SVB is a Santa Clara-based bank that lends money to and takes deposits from Silicon Valley tech startups. Why has SVB's stock price crashed? "The failure of SVB Financial could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and holding their operating cash," he said on Twitter Thursday evening.
The Fed is excessively data-dependent, says Mohamed El-Erian
  + stars: | 2023-03-08 | by ( ) www.cnbc.com   time to read: 1 min
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailThe Fed is excessively data-dependent, says Mohamed El-ErianMohamed El-Erian, Allianz and Gramercy advisor and president of Queens' College, Cambridge, joins 'Squawk Box' to discuss whether the Federal Reserve is still data-dependent, what the yield curve inversion means for the economy, and more.
Watch CNBC's full interview with Allianz's Mohamed El-Erian
  + stars: | 2023-03-08 | by ( ) www.cnbc.com   time to read: 1 min
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailWatch CNBC's full interview with Allianz's Mohamed El-ErianMohamed El-Erian, Allianz and Gramercy advisor and president of Queens' College, Cambridge, joins 'Squawk Box' to discuss whether the Federal Reserve is still data-dependent, what the yield curve inversion means for the economy, and more.
Fed boss Jerome Powell's latest comments boost the risk of a crash in stocks, Mohamed El-Erian has warned. The comments "could risk both economic well-being and financial stability," top economist El-Erian said. "Yet once again, remarks by Federal Reserve chair Jerome Powell fueled considerable volatility in markets that could risk both economic well-being and financial stability." But Powell's comments suggest a 50-point rise is back on the table for next month. Read more: Brace for US stocks to crash again – their extreme valuations echo the 2022 bear market, Morgan Stanley strategists warn
The Federal Reserve "flip-flopping" on monetary policy is threatening to send the U.S. economy into a recession, economist Mohamed El-Erian said Wednesday. "We're going to have a recession made at the Fed," El-Erian told CNBC during a " Squawk Box " interview. "There's no reason the U.S. economy should go into recession other than a Fed policy mistake." On top of that, traders repriced their expectations for rate hikes ahead. El-Erian said much of the economic anxiety can be laid at the feet of Fed officials, who he said should have held to their more aggressive hikes rather than the 25 basis point increase approved Feb. 1.
Fed funds futures pricing suggests 61.6% odds of a half-point increase, up from 31.4% on Monday. Getting inflation back to 2% "is likely to be bumpy," Fed Chair Jerome Powell told senators. There's a 61.6% probability the Fed will raise its benchmark rate by 50 basis points on March 22, according to the CME FedWatch tool tracking fed funds futures pricing. The slowdown followed four straight increases of 75 basis points. The probability for a move of 25 basis points were still larger, at 56.3%.
The bond market is capturing a shift higher in interest-rate expectations, which is bad news for stocks. The yield on the 10-year Treasury note breached 4% this week for the first time since November. And high bond yields may be here to stay, according to billionaire investors such as Bill Gross and Jeffrey Gundlach. And this change of sentiment is basically what's reflected by the latest jump in bond yields, which has corresponded with declines in stocks. What's next for bond yields?
Why European inflation numbers are relevant to us
  + stars: | 2023-03-02 | by ( ) www.cnbc.com   time to read: 1 min
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailWhy European inflation numbers are relevant to usMohamed El-Erian, Allianz and Gramercy advisor and president of Queens' College, Cambridge, joins 'Squawk Box' to discuss the need for stabilization in the 2-year note, why European inflation numbers matter, and more.
The Federal Reserve faces two policy choices when it meets later this month, neither of which is particularly appealing, economist Mohamed El-Erian said Thursday. Markets expect the central bank to hike its benchmark interest rate another 0.25 percentage point when it next meets on March 21-22. But they also are making room for the possibility of a 0.50-point increase, an alternative El-Erian thinks is preferable, though not ideal. "If they are truly data-dependent, then they should go back to 50" basis points, El-Erian said on CNBC's "Squawk Box." A basis point is equal to 0.01 percentage point.
More hot inflation data is putting the Fed "behind yet again," according to economist Mohamed El-Erian. He told Bloomberg TV on Friday that the latest reading is "bad news across the board." He added that the central bank could move to a 50-basis-point rate hike at the next FOMC meeting. Sign up for our newsletter to get the inside scoop on what traders are talking about — delivered daily to your inbox. It is just bad news," El-Erian told Bloomberg TV on Friday.
Fed Chairman Jerome Powell warned — once again — last week that rates may eventually end up higher than markets anticipate as the fight against inflation remains far from over. Now, ahead of the CPI report, let's check in with the outlook for stocks. To Bernstein strategist Matthew Palazzolo, today's inflation reading will kick off a momentous five-week stretch for equities. The jobs report on March 3, the next inflation report on March 14, and the Fed meeting on March 22 will shape the rest of the year for stocks, he explained to my colleague George Glover. Your best bet for where the stock market's going this year can be found in the two-year Treasury yield, according to Mohamed El-Erian.
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailMohamed El-Erian: Service disinflation is not going to happen for a very long timeMohamed El-Erian, Allianz and Gramercy advisor, joins 'Squawk Box' to discuss his expectations from the markets, why the 2-year treasury is moving lower, and insights into the inflation picture.
Inflation has a 75% chance of rebounding, according to top economist Mohamed El-Erian. El-Erian warned inflation could remain sticky at 4%, and the Fed could spark a recession. But that optimism is premature, El-Erian warned, as inflation has a significant chance of rebounding or remaining elevated. He estimated that there was only a 25% chance of inflation steadily declining from here, and a 25% chance that prices would bounce back sharply, causing a "U inflation" scare. Bank of America also warned of rebounding inflation, which could flip the stock market upside down, analysts said.
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailMohamed El-Erian: Here's how investors should position with today's uncertaintyMohamed El-Erian, Allianz and Gramercy advisor, joins 'Squawk Box' to discuss his read of the U.S. economy, how investors should operate, and more.
The Federal Reserve's not going to start cutting interest rates soon, Morgan Stanley's top strategist said. When investors realize that, the focus will shift to the weakness in earnings, Mike Wilson told CNBC. But with once-soaring prices starting to cool, many investors now expect the Fed to start cutting rates by the end of 2023. But many strategists have put the gains down to investors' blindly focusing on hypothetical Fed rate cuts while ignoring other factors, such as earnings. "The Fed will be part of that story, but I think it'll be cutting rates long after the market has bottomed."
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailI'd be shocked if Fed did anything other than 25 bps hike, says Mohamed El-ErianMohamed El-Erian, Allianz and Gramercy advisor and president of Queens' College, joins CNBC's 'Squawk Box' to discuss why the time is not suitable for a Federal Reserve downshift, El-Erian's fears with inflation, and more.
Surging inflation may appear largely in the past, but a shift to a 25 basis point hike at the next Federal Reserve policy meeting is a "mistake," according to Allianz Chief Economic Adviser Mohamed El-Erian. "'I'm in a very, very small camp who thinks that they should not downshift to 25 basis points, they should do 50," he told CNBC's "Squawk Box" on Monday. Inflation, he said, has shifted from the goods to the services sector, but could very well resurge if energy prices rise as China reopens. El-Erian expects inflation to plateau around 4%. "That's probably the best outcome," he said of the latter.
Watch CNBC's full interview with Mohamed El-Erian
  + stars: | 2023-01-23 | by ( ) www.cnbc.com   time to read: 1 min
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailWatch CNBC's full interview with Mohamed El-ErianMohamed El-Erian, Allianz and Gramercy advisor and president of Queens' College, joins CNBC's 'Squawk Box' to discuss the rallies investors have seen from stocks and bonds, his thoughts on inflation, and more.
Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailInflation has moved from goods to services sector, says Mohamed El-ErianMohamed El-Erian, Allianz and Gramercy advisor and president of Queens' College, joins CNBC's 'Squawk Box' to discuss the rallies investors have seen from stocks and bonds, his thoughts on inflation, and more.
A 1970s-style financial crisis will hit the US economy if the Fed lets up in its inflation fight, according to Larry Summers. The former Treasury Secretary criticized recent calls to raise the inflation target from 2%. At a panel discussion at the World Economic Forum, Summers rebuked suggestions from some economists that the Fed should lift its inflation target from its long-standing 2% target to 3%-4%. Economist Mohamed El Erian is among those that have suggested the Fed may have to revise its inflation target to 3%-4%, though the Fed has reiterated its commitment to its original 2% goal. "It would be a grave error for central banks to revise their inflation target upwards at this point.
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