Rate hike expectations too high: El-Erian
Kevin Warsh’s hawkish Jackson Hole address has market participants quickly hedging against a September rate hike.
The two-year Treasury yield is up a whopping 12 basis points to 4.35% today, and September rate-hike odds have jumped to about 60% from roughly 35% one day ago.
Mohamed El-Erian, former chief at fixed-income asset management giant Pimco, is offering a contrary voice on Friday afternoon, calling those 60% odds “too high.”
“Market-based measures of inflation expectations remain well anchored,” argued El-Erian. “AI-driven productivity gains give reasons to be more optimistic about the future evolution of the supply side, while AI demand-side worries are likely to abate,” he continued.
“Fed rate hikes will hit most already struggling, interest-rate-sensitive sectors such as housing,” he concluded.
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