Mohamed A. El-Erian , Columnist

Fed’s No-Win: Balancing Growth and Market Fragility

Powell increasingly must make the best of factors mostly outside his control, increasing fears of a policy mistake.

December 20, 2018 at 12:17 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.”

He didn’t go over well on the floor of the New York Stock Exchange.
Photographer: Michael Nagle/Bloomberg

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Resisting unusual pressure from both politicians and notable market participants, Federal Reserve Chairman Jerome Powell and his colleagues on the Open Market Committee on Wednesday raised interest rates by 25 basis points and slowed the path for future hikes by less than markets hoped.

In doing so, the central bank reaffirmed that its focus remains firmly domestic and economic. But the markets’ reaction suggested the move was seen as heightening concerns about a policy mistake, rather than responsible policy making. This, and what’s likely to play out over the next few weeks, illustrates a bigger phenomenon: the threat that the Fed and other central banks are increasingly in a no-win situation, due to factors mostly outside their control.