El-Erian says world ‘frozen’ by strong dollar, high US rates
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Policymakers around the world are struggling to confront a surging greenback and lofty US interest rates, according to Mohamed El-Erian. El-Erian, the president of Queens’ College, Cambridge and a Bloomberg Opinion columnist, said that authorities are unsure how to react to a generalised dollar strengthening and a generalised increase in US interest rates. In the past, when these two factors have gone too far, they have broken something elsewhere. El-Erian cited the yen’s plunge below the 154 per dollar mark as an example of inaction from Japanese policymakers. He believes that sectors with imbalanced balance sheets and countries with unsustainable debt are the most exposed to the impact of tighter financial conditions. El-Erian also stated that while the likelihood of the Fed hiking interest rates is low, it is not zero. If inflation worsens, a rate hike could lead to a regional banking crisis and damage in the marketplace.



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