Mohamed A. El-Erian

It’s been another rollercoaster day in the oil market with both benchmarks trading in a wide range (CNBC charts below). Between the remarks from officials in Washington DC and those out of Israel — both following the attacks on energy infrastructure — traders are finding it difficult to price the uncertainties facing Middle Eastern supply. #economy #oil #markets

The bear flattening of the US yield curve continues today, driven by two primary factors: first, market consensus pushing expectations for a Federal Reserve rate cut past 2026 and into 2027; second, while inflation concerns are pressuring longer-term yields upward, that is being tempered by some mounting growth anxieties. #economy #markets #growth #inflation #bonds

A consequence of unstable, unpredictable asset-class correlations—which we are seeing more often—is that it pushes investors toward cash as the ultimate (nominal) safe haven. This appears to be happening today across several asset classes, further tightening financial conditions. #economy #markets

For the energy-secure US, damaged infrastructure due to the War means higher prices. In some other countries, however, the challenge is twofold: higher costs and worries about genuine supply shortfalls in the months ahead. It’s encouraging a growing number of them to implement energy-saving measures. #economy #energy #markets

This, from Bloomberg, is not good news for a market segment that is already challenged to separate signal from noise, let alone properly differentiate among funds/firms in this space. #markets #privatecredit

While on the UK, its sovereign bonds — and, therefore, borrowing costs for the government, corporations and households — are again behaving as “high beta” assets. #economy #uk #markets #bonds

Better labor market news for the UK going into a more challenging period due to the spillover effects of the Middle East War: The UK economy added 20,000 jobs in February, building on an upwardly revised 6,000 increase in January. Both were better than expected, as was the unchanged unemployment rate of 5.2%. Less good is what the labor market will have to deal with in the period ahead due to the stagflationary wind blowing from the Middle East War. #economy #uk

Despite the continued escalation in the Middle East War--particularly the latest attacks on energy infrastructure by both Iran and Israel -- quite a few market participants are holding on to the view that the global economy is still in a "mean reversion" paradigm: the view that the genie of energy damage and economic financial disruption can be put quickly back in the lamp. What is in play here is not a narrow "transitory "dynamic when it comes to the disruptive economic and financial effects. We are more in the world of "multiple equilibrium,” with each tipping point fueling this dynamic. #economy #middleeastwar #markets

For the reasons detailed in last Sunday’s “Weekly,” the Bank of England and the Bank of Japan kept interest rates unchanged. The next decision will most likely involve a hike in rates given the escalation phase of the Middle East War and the associated economic effects of the attacks on energy infrastructure. More to follow. #economy #markets #centralbanks

International energy prices rise further as more military attacks damage energy facilities in the Middle East. (As detailed in earlier posts, this constitutes another tipping point in a war that risks deepening and prolonging the disruptions to the global economy.) #economy #middleeastwar #markets

Federal Reserve Chair Powell on his plans: “I have no intention of leaving the board until the investigation is well and truly over with transparency and finality.” #economy #federalreserve

Fed Chair Powell was just asked at his press conference if the world is in an era of frequent supply shocks. He responded by dismissing the recent shocks as "one-offs." That's not where my thinking is. As outlined in the book "Permacrisis," there are good reasons to suggest that we are in a world of more frequent and more violent shocks. #economy #markets #federalreserve

Judging from the Federal Reserve's updated macroeconomic and policy rate projections, officials are waiting to incorporate the latest developments—be it the hotter-than-expected January-February inflation, the disappointing February jobs report, or the big elephant in the room (the impact of the war in the Middle East). #economy #markets #inflation #growth #jobs #federalreserve

More Evidence of Hotter-than-Expected US Inflation Ahead of Middle East Conflict: Per the Bloomberg table below, US PPI monthly inflation accelerated to 0.7% in February, significantly outpacing the consensus forecast of 0.3%. January's was 0.5%. Core monthly inflation was also hotter than expectations at 0.5%. This brings annual headline inflation to 3.4% and core to 3.9%. These figures set a high inflation baseline just as the Middle East War, which began on February 28, is certain to exert further upward pressure on prices. (Reminder, the two-day Federal Reserve meeting concludes today.) #economy #markets #inflation

This, from the @wsj, shows the number of dissenting Federal Reserve officials (board governors and presidents of regional Feds) at each of the central bank’s policy meetings. Per the article by @NickTimiraos, “divisions at the Fed have been building. What until recently had been a culture of near-unanimous votes has given way to more dissent.” #economy #federalreserve #markets

On the economic and financial implications of the Middle East War Further to the post below, today’s news is consistent with the view that—judging by their actions—all three warring parties (US, Iran, and Israel) remain in the escalation phase. With each passing day in this phase, the risks of reaching economic and financial tipping points increase. #economy #markets #middleeastwar

Mohamed El-Erian tells Business Insider why he's raised his US recession odds from 25% to 35%. bit.ly/4rFE5hf

Now in its third week, the Middle East War is triggering more economic and financial tipping points, both within the energy sector (see the Bloomberg data below) and well beyond. Remember, the key dynamic here is the shift from "mean reversion" to "multiple equilibria" -- that is, a move toward a less favorable economic and financial outcome makes further adverse moves more likely, rather than a return to the status ante. #economy #markets #middleeastwar

Look what popped up on my phone—the photo from the “Daughter-Dad” costume school dance years ago!

As expected, the Reserve Bank of Australia (RBA) hiked interest rates by 25 basis points. Markets suspect this telegraphs what's on the cards for other single-mandate central banks (namely, stable prices), such as the Bank of England and the ECB. While a hike isn't expected this week for them, the escalating inflationary risks stemming from the Middle East War make future tightening likely. The view shifts, however, for dual-mandate central banks (stable prices and maximum employment) like the Federal Reserve. For the Fed, markets are still expecting a rate cut —though the timeline has shifted further out into the year. #economy #markets #rba #australia