- Officials might regret not going even further in how fast the Federal Reserve trims support, Mohamed-El Erian said.
- "Markets can handle the Fed easing its foot off the stimulus accelerator," he said in a tweet.
- The Fed doubled the reduction in its monthly bond purchases on Wednesday to $30 billion a month from $15 billion.
Some Federal Reserve policymakers might be wishing they'd been a bit more aggressive about pulling back on monetary stimulus, Mohamed El-Erian said.
Even though the Fed has doubled the pace of tapering, or winding down, its monthly bond buying, that might be insufficient in the face of sky-high inflation, the chief economic adviser at Allianz hinted.
He also noted that global stocks surged in the wake of the central bank's announcement on Wednesday, with the major US indices closed between 1% to 2% higher — another sign less economic support is needed.
"Today's higher close for US #stocks illustrates what some of us have been postulating: #Markets can handle the #Fed easing its foot off the stimulus accelerator," he said in a tweet Wednesday.
"Wouldn't be surprised if, given the #inflation outlook, some within the Fed regret not going further and tapering more."
In a move hailed as a major hawkish pivot by some analysts, the US central bank said it would double the pace of tapering its bond-buying, to trim purchases by $30 billion a month.
El-Erian has previously expressed concern over the Fed's slow tapering timeline, saying this could be problematic for economic stability.
In a recent interview to CBS' Face the Nation, he said of the Fed's stimulus aid: "There is no reason why they should be injecting so much liquidity."
"There is no reason why they should be boosting the housing market at a time when house prices are pricing Americans out of buying homes. They should ease their foot off the accelerator in order to avoid slamming on the brakes later on."
The Fed introduced the program in March 2020, saying it would purchase Treasuries and mortgage-backed securities to support smooth market functioning during the pandemic.
It planned to spend $90 billion in December, down from the pandemic-era high of $120 billion, after it decided to reduce purchases by $15 billion a month. With the doubling in pace, January's asset buys will total $60 billion, putting the bank on track to make zero purchases by March 2022.
"Beginning in mid-January, we will reduce the monthly pace of our net-asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities," Fed Chair Jerome Powell said at the post-FOMC conference on Wednesday.
Powell acknowledged the acceleration in pace of tapering was because of the "strengthening labor market and elevated inflation pressures."
Notably, there was no use of the word "transitory" to describe inflationary pressure — something that El-Erian has said would go down as one of the Fed's worst calls ever.
The US consumer price index soared 6.8% year-over-year in November, its highest in almost four decades, official data showed last week. On top of that, producer price inflation rose 9.6% in November, the fastest pace since records began in 2010, and up from 8.8% in October, according to an update this week.