El-Erian: Too much uncertainty. The Fed will decide after the referendum Brexit – BBC

“If it were not for the uncertainty of the referendum on Brexit of June 23, a rate hike in June by the Federal Reserve would be appropriate,” says Mohamed El-Erian, 57, chief economic advisor of Allianz. He explains: “The labor market continued to improve, creating new jobs and reducing the bag of the unemployed; inflation and wages are finally going on; and the central bank is increasingly aware of the collateral damage and unintended consequences of higher interest rates artificially low. If the Fed does not do a hike in June, which will make it is highly likely in July, or certainly at the September meeting. ”

And the proof that the US economy is fine?

“America is recovering, but does so in a gradual process which does not allow her to reach escape velocity. Although grow more than other advanced economies, it has yet to recover income lost from the Great Recession. It is a situation that puts pressure future growth potential. “

Europe improves, even if only slightly, thanks to the expansionist policy of the ECB, said Thursday the president Mario Draghi, raising estimates on the GDP in the euro area for this year to 1.6% from 1.4% expected in March.

“I agree with President Draghi, when he argues that the measures announced by the ECB in March, they played an important role in minimizing the risk of a serious growth deflationary after the instability in global financial markets in January-February. But without the support of other policies its influence remains modest; and it is not without risk given how the ECB has ventured into the territory of unconventional policy. At the end to pay the highest price of low rates or negative will be savers, pensioners and consumers of financial services as a long-term life insurance. ”

In June the ECB will increase purchases of securities from 60 to 80 billion per month and will launch new auctions of loans on concessional super rates to stimulate the economy. Just to give a further boost to GDP?

” it is unlikely that there will be a significant increase in the growth of the euro zone unless the new ECB measures are part of a more comprehensive policy response. As he said Draghi, growth requires structural reforms, more public investment in infrastructure, and fiscal policies conducive to growth. No, growth will not only warm, but will be vulnerable to non-economic shocks, whatever the increasingly fluid internal political conditions in some countries, or Brexit. “

Draghi says that the ECB is ready to any outcome of the referendum. What would be the consequences of an exit of Britain from the EU?

“The yes to Brexit would probably cause the global financial volatility. The scope and duration would depend on the speed of an agreement Alternatively, such an association agreement. Ironically, in the long run, the Brexit could solve a recurring problem that has bothered Europe for quite a while ‘. The UK thinks that the EU is a super free-trade area. A destination. It is not what they think the other big EU countries, including France and Germany, for which the EU is part of an ever closer union, which has economic, social and political. This difference of view has never been resolved in spite of decades of membership of the United Kingdom to the EU. “

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June 3, 2016 (modified June 3, 2016 | 21:43)

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