El-Erian: "As long as the Fed avoids further policy mistakes, recession risk remains low"

[Asia Economy New York=Special Correspondent Joselgina] Mohamed El-Erian, former CEO of PIMCO, the world's largest bond management firm, and senior advisor at Allianz, stated that "there is a risk of a recession," but also predicted that "unless the Federal Reserve (Fed) makes another policy mistake or a market accident occurs, it will not lead to a recession."

Senior Advisor El-Erian appeared on CNBC's "Squawk Box" on the 17th (local time) and said, "Looking at the retail sales data released today, the U.S. economy is relatively strong." He assessed the current situation by saying, "There is a risk of recession, but it is low. However, the growth rate is slowing down."

El-Erian, who has publicly pointed out since last year that the Fed has misjudged inflation, once again criticized the central bank's policy mistakes on this day. He explained, "The first policy mistake was a misinterpretation of inflation," adding, "The second was that the Fed was too slow to correct this misinterpretation, and the third was not being honest about how difficult an economic soft landing would be."

Previously, the Fed had defined inflation as transitory, which led to inappropriate policy decisions, and it was also criticized for being late in correcting this misinterpretation and taking action.

Regarding former Fed Chairman Ben Bernanke's warning the day before about the Fed's delayed response and the possibility of stagflation, El-Erian said, "As I mentioned last week, stagflation is my baseline," expressing concern that "economic growth is slowing and high inflation is persisting." Earlier, El-Erian had predicted, "The Fed's response was too late," and "the inflation problem is widespread throughout the economy, which will eventually lead to growth issues."

Meanwhile, the U.S. Department of Commerce released retail sales data for April on the same day, showing a 0.9% increase from the previous month, continuing a four-month streak of growth. Industrial production in April also rose 1.1% from the previous month, exceeding expectations of 0.5%.