El-Erian: Fed can’t do much more to boost economy

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Despite all the anticipation over yesterday’s Federal Reserve meeting, there was little else the central bank could do now to help the economy recover, Pimco’s co-CEO Mohamed El-Erian told CNBC.

Speaking just hours before the meeting of the Federal Open Market Committee (FOMC), El-Erian said the central bank can only do so much to foster growth and avoid deflation. The Fed has spent the past three years on a route of aggressive rate cuts and purchases of trillions in various securities but is running out of measures it can take.

“Fed policy is not enough. You need to do more than that to get off that road,” he said.

Asked what needs to be done, he said, “First, selling a vision, a long-term vision as to what the policy response is to restore growth and employment. And second, to fill it out with proper structural policies.”

“The country is facing structural issues and it needs structural solutions,” he added. “Just focusing on the Fed is like sending in a wide receiver to play quarterback. Yes, the wide receiver is a good athlete. But he’s not a quarterback and we need to focus on structural issues.”

Source: CNBC, August 10, 2010.

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1 comment to El-Erian: Fed can’t do much more to boost economy

  • Kurt Schoeneman

    El-Erian is right. Too bad we don’t seem able to think strategically. How bad does it have to get before we will do it? I suppose it is hard to act before the 2×4 hits you in the head but it might be wise. Hi Prieur – nice to get your e-letter. Best regards!

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