Mohamed El-Erian slams Powell's suggestion that the bank turmoil is over – says it could be added to a list of Fed communications that eroded its credibility.
Mohamed El-Erian has raised doubts about Federal Reserve chair Jerome Powell's suggestion that the worst of the banking turmoil is over, saying it may belong to a list of statements that ended up eroding the institution's credibility.
The top economist made the remarks after PacWest Bancorp's shares plunged more than 50% in after-hours trading Wednesday on news it was exploring strategic options including a sale. It is the latest regional bank to be hit by the turmoil that started with Silicon Valley Bank's collapse in March. Four lenders have folded up so far, with First Republic Bank shutting down earlier this week.
Following the Fed's latest interest-rate increase on Wednesday, Powell told reporters that First Republic's failure and its subsequent takeover by JPMorgan was"an important step toward drawing a line under that period of severe stress" that the banking sector has undergone since March. Three banks were at the center of the recent turmoil, he said, adding that"those have now been resolved.
"I fear that this may end up being added to the list of unfortunate Federal Reserve communications over the last few years that have eroded the credibility of the Fed, undermined its policy guidance/effectiveness, and risked its political autonomy," El-Erian said in a
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