Totally Avoidable' Recession Blamed On Fed Mistakes

Mohamed El-Erian, a well-known economist, said that the Fed "made two big mistakes that I think will go down in history" and cause a "damaging" recession.

He said that the Fed's first mistake was to say that inflation was temporary when it wasn't. "What they meant by that was that it was only temporary and could be fixed," he said.

The second mistake was when the Fed finally saw that inflation was high and sticking around, but "didn't do anything about it," he said.

El-Erian used a driving analogy to explain why the Fed had to slam on the brakes this year, "which would tip us into recession."

"Even Chair Powell has gone from hoping for a soft landing to expecting pain. Exactly. A late Fed costs that much. It must fight inflation and regain credibility "he said.

El-Erian told investors earlier this month to stop their "love affair" with a Fed pivot, in which the central bank would stop its aggressive tightening of money.

Inflation in the US economy is at its highest level in 40 years, so the Fed has been quickly raising interest rates.

On Thursday, the September inflation report will be released public. At its meeting on November 1 and 2, the Fed is expected to raise rates for the sixth time.

The federal funds rate would move from its current range of 3% to 3.25%, if this were to take place.