El-Erian says Fed missed its chance to raise US rates

Allianz chief economic adviser Mohamed El-Erian says the US Fed had missed its chance to raise interest rates when US and international data was “more in alignment”. There had been an opportunity to get off zero interest rates when US domestic data was relatively strong and international data was OK but this had now passed. A gloomy outlook for international markets that began in emerging markets but was now spreading to mainstream markets highlighted the Fed’s most glaring problem of “pretty awful international data”. As a result the Fed has ended up looking “wishy-washy” when it came to preparing the market for an eventual interest rate hike. The recent Fed minutes show that the Fed is torn between raising rates in September and waiting for more data to confirm that economic recovery in the US was on track. Recent weak data out of China, falling energy and commodity prices and the devaluation of China’s yuan had created uncertainty about the world’s second largest growth engine.