Mohamed A. El-Erian , Columnist

Powell Goes Off Script and Reduces Flexibility

The Fed chair’s off-the-cuff comment about a March rate cut being unlikely restricted the central bank’s policy options and undermined its communication.

February 1, 2024 at 4:54 PM UTC

By Mohamed A. El-Erian

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.”

Tricky communication.
Photographer: Julia Nikhinson/AFP via Getty Images

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For several months, I have pushed back against the market expectation that the Federal Reserve’s cycle of interest-rate cuts would start as early as March. Just last week, in an interview on Bloomberg Surveillance, I said that June was much more probable — both for when the easing cycle should start and for when it will start.

Accordingly, you would expect me to welcome Wednesday’s remarks by Chair Jerome Powell that a rate reduction in March is not the Fed’s “base case.” The problem is that this was handled in a way that unnecessarily robs the central bank of policy flexibility while lengthening the already long list of recent communication mishaps.