El-Erian: Fed Will Still Taper in September

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Sept. 6 (Bloomberg) -- Pimco CEO and Co-Chief Investment Officer Mohamed El-Erian discusses the impact the jobs report may have on the Fed's bond buying plans. He speaks with Betty Liu on Bloomberg Television's "In The Loop." (Source: Bloomberg)

History is a very good guide.

Pimco ceo mohamed el-erian joining us through the opening bell today.

What is your call after this number?

On the economic front, it is a disappointing report at the macro level and more disappointing at the micro level.

In regards to policy, it suggests that the economic argument for tapering are weaker.

We still expect they will taper in september.

They are not just tapering because of economics, they're worried about cost and risk.

They will still go forward because of the overall considerations.

What is the harm?

This is such a decidedly mixed report.

What is the harm for the fed to wait a little bit and see come october, november?

There are no great choices for the fed at this point.

What do you do the gives you the greatest option analogy -- options?

They could reverse course if the economy weakens further.

If the other two instruments are highly accommodative.

Are you implying that this report ultimately is not making much difference for the fed?

Correct.

You needed a very weak or very strong report.

This is a somewhat weak report.

This is not that extreme to cause a taper heavy, which he would have gotten from a strong report, or no taper, which is what you would have gotten from a weak report.

Tell us from the washington side of things how this is going to play.

We know the republicans came out with a statement already, and they touted the line they always have.

We are creating jobs, but it's not good enough.

The e-mail and fax machines send out pretty much the same statement every month.

Republicans and democrats saying, we are gaining some traction here.

It's a beautiful day in washington, but there are clouds circling.

That has to do with the budget battle and debt ceiling.

I want to get mohammed's stake on how he thinks bernanke and the fed could be riparian themselves for a debt -- preparing themselves for a debt ceiling fight.

These issues are really important.

They have been lost with the talk of fed tapering and syria.

The bottom line is that ultimately they will be resolved.

We don't think the fed is going to be proactive in getting more insurance against these downsides, but there is a probability that we may have a repeat of 2011. in that case, the fed would be proactive -- reactive.

I don't think the fed will be proactive.

How much will fed tapering, and the fact that they need to do it this month or this year -- how much of it is because ben bernanke wants to keep his legacy intact and finish the job before he allows the other fed chairman to come on?

I have heard that argument made.

There may be some merit to that chairman bernanke wants to give greater option analogy -- optionality to whatever comes next.

It is a committee structure.

A committee is spread out quite a bit on the views of those who believe in the taper.

Mr.

bernanke will likely try to get the committee united on a taper.

How will this affect the nomination process for fed chairman?

Everyone is waiting for the president to name his nominee.

Ben bernanke's term does not expire until the end of january.

You have the possibility that whoever the president names, they could get confirmed in a short amount of time.

You have a shadow fed chairman waiting in the wings.

I want to get mohamed's sense if there is a risk here of undermining bernanke's credibility at this critical time.

How are the markets going to treat that?

The market has priced in an extra risk premium that reflects this leadership transition.

The transition becomes more important when you are using forward guidance.

You could get up to four

This text has been automatically generated. It may not be 100% accurate.

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