Fed moving appropriately; ECB too hesitant: El-Erian
By Divya Chowdhury and Billy Chan
(Reuters) - The U.S. Federal Reserve is moving appropriately on the path to unwind asset purchases and normalize rates, while the European Central Bank (ECB) may be too hesitant, said Mohamed El-Erian, chief economic advisor at the Allianz Group.
The Fed, ECB and Bank of Japan (BOJ) need policymakers to step up to take action on structural reforms to be more effective, El-Erian told the Reuters Global Markets Forum in an interview on Friday.
Following are edited excerpts from the conversation:
Q: Are central banks taking the right route to unwind their asset purchases and normalize rates?
A: When it comes to taking the foot off the unconventional stimulus pedal, the Fed appears to be moving appropriately. The ECB may be showing a little too much hesitancy. Importantly, the two of them – as well as the Bank of Japan – need other policymakers, with tools better suited for the task at hand, to step up to the plate more forcefully – especially when it comes to pro-growth structural reforms, more balanced demand management, better cross-border policy coordination and, in some isolated cases, targeted debt reduction (e.g., Greece).
Otherwise, it will be challenging for the central banks to deliver a "beautiful normalization," adopting a phrase from Bridgewater’s Ray Dalio. As you know, I have worried that the central banks have been "the only game in town" for too long already. Continued...