On Tuesday, acclaimed economist Mohamed El-Erian highlighted a significant shift in the global economy, emphasizing an increasingly rigid supply side, contrasting the previous decade dominated by insufficient aggregate demand.
What Happened: El-Erian responded to posts on X, formerly Twitter, by Lisa Abramowicz, which discussed the potential hawkish stance of the FOMC meeting due to supply-side constraints and the rising interest rates priced in for the Fed’s future meetings.
El-Erian emphasized the growing acknowledgment that the global economy is currently navigating a period with a less flexible supply side.
He stated, “Slowly but surely, there is growing recognition that the global economy is now navigating a period with a less flexible supply side — different from the prior decade where it was more an issue of insufficient aggregate demand. The implications extend well beyond the immediate outlook for the Fed's forward policy guidance.”