El-Erian Says Ukraine War Effect to Spur U.S. Inflation Higher

EL-Erian Says Ukraine War Effect to Spur U.S. Inflation Higher

Allianz SE’s Mohamed El-Erian said the economic fallout from Russian President Vladimir Putin’s full-scale invasion of Ukraine is likely to include a further pickup in U.S. inflation.

U.S. consumer prices rose at a 7.9% annual rate in February, keeping inflation at 40-year highs. El-Erian said he estimates the rate will peak at “very close or above 10%” before retreating. 

“There will be a Putin inflation component,” he said on CBS’s “Face the Nation,” due to “the disruption that Putin’s war implied for commodity prices, supply chains and shipments.” 

The Allianz chief economic adviser renewed his criticism of the Federal Reserve, saying it was slow to respond to accelerating price pressures. Fed policy makers are considered likely to back a 25-basis-point rate hike on Wednesday after Chairman Jerome Powell publicly backed the increase.

“We are here because the Fed is very late and has no good policy options available anymore,” El-Erian said. 

If U.S. inflation hits double digits, it’ll happen this summer, he said.

“We can’t avoid stagflation -- lower growth, higher prices -- but we certainly can avoid a recession and we can bounce back quickly,” El-Erian said.

El-Erian also is president of Queens’ College, Cambridge, and a Bloomberg contributor.

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