Economist El-Erian: Political Factors Pose Threat to Fed's Rate Cut in September

On July 13, well-known economist El-Erian said that the possibility of the Fed cutting interest rates in September was threatened by the post-election inflation shock in United States. “There are two factors complicating the prospect of a rate cut in September,” El-Erian said Friday, adding that economic data could be bad and that there were political factors. How worried is the Fed about the post-election inflation shock due to policy factors? El-Erian believes that the United States will not have a situation where former United Kingdom Prime Minister Liz Truss turned the market upside down because of the budget plan. He expects the Fed’s “biggest concern” is that it will have to reverse rate cuts and restart rate hikes as inflation re-accelerates. El-Erian added that the likelihood of a Fed rate hike next year is low, but it cannot be completely ruled out that the rate hike could be due to a major external shock or “fundamental changes in fiscal, trade and other aspects of policy.”