Mohamed A. El-Erian , Columnist

No, Fed Didn't Make a Mistake by Hiking Rates

A report adds to the growing debate about the wisdom of monetary policy normalization.

June 27, 2017 at 6:00 AM UTC

Mohamed A. El-Erian is a Bloomberg Opinion columnist. A former chief executive officer of Pimco, he is president of Queens’ College, Cambridge; chief economic adviser at Allianz SE; and chair of Gramercy Fund Management. He is author of “The Only Game in Town.”

Dual mandate.
Photographer: Mark Wilson/Getty Images

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By encouraging systemically important central banks to move forward with interest rate hikes, the Bank for International Settlements’ well-written annual report will add fuel to the growing debate about the wisdom of the Federal Reserve’s ongoing process of monetary policy normalization. This discussion boils down to a judgment on four key issues on which there are quite a few divisions, including within the central banking community.

Some have already argued that, having hiked for a second time this year and signaled its intention for another rate rise in the second half of 2017, the Fed is making a policy mistake that risks choking economic growth. Others, including the BIS, welcome the central bank’s willingness to gradually move away from too many years of exceptional monetary stimulus, financial volatility repression and ample support for asset prices.