Trillion-Dollar Asset Manager Slams Fed As ‘Late and Wrong’ After Powell Took ‘Too Narrow a View’ on Jobs

A financial services firm with over $2 trillion in assets under management says the Federal Reserve is once again late to take action.

In a new CNBC interview, Allianz chief economic advisor Mohamed El-Erian says the firm believes that the Fed should have cut interest rates as early as July.

According to El-Erian, the Fed’s decision to keep interest rates steady over the past year is now costing everyday Americans who are struggling to find work in a softening job market.

“There was a bunch of us outside and inside the Fed that were arguing for a July cut. And our concern, which is playing out in the data, is that Chair Powell had taken too narrow a view of the jobs market. And by that, he was ignoring the weakness that was starting to come to the surface. And the problem, as you know, is that if you don’t address weakness in the labor market, it becomes nonlinear. It accelerates, and it becomes much more damaging.

So, yes, I think they have gotten it wrong. I think, once again, they’re late. They will cut in September. And I suspect there will also be a discussion: should they cut by 25 or 50 [basis points]?”

The Bureau of Labor Statistics shows that the US economy added just 22,000 jobs in August, well below the consensus expectation of 75,000. In addition, the unemployment rate ticked up from 4.2% in July to 4.3% last month.

Meanwhile, data from the CME FedWatch tool reveals that 92% of market participants are anticipating a 25 basis point (bps) cut this month, with only 8% predicting a 50 bps reduction in interest rates.

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