Economist Mohamed El-Erian said core inflation is still going up and the U.S. is heading toward a damaging recession "that was totally avoidable" following another week of volatility in the stock market.
El-Erian, the chief economic adviser for Allianz, also said the Federal Reserve made mistakes that "will go down in the history books," including characterizing inflation as transitory.
"By that, they meant it is temporary; it's reversible; don't worry about," El-Erian said Sunday during an appearance on CBS News' "Face the Nation."
"That was mistake No. 1. And then mistake No. 2: When they finally recognized that inflation was persistent and high, they didn't act. They didn't act in a meaningful way. And as a result, we risk mistake No. 3, which is by not easing the foot of the accelerator last year, they are slamming on the brakes this year, which would tip us into recession. So, yes, unfortunately this will go down as a big policy error by the Federal Reserve."
Federal Reserve Governor Lisa Cook on Thursday said more interest rates will be necessary to wrestle inflation under control.
"With inflation running well above our 2% longer-run goal, restoring price stability likely will require ongoing rate hikes and then keeping policy restrictive for some time until we are confident that inflation is firmly on the path" back to 2%, she said at the Peterson Institute for International Economics.
El-Erian said it was also impossible to achieve a soft economic landing, as Federal Reserve Chairman Jerome Powell had argued for months was possible.
"Even Chair Powell has gone from looking for a soft landing to softish landing to now talking about pain; and that is the problem, that is the cost of the Federal Reserve being late," he said. "Not only does it have to overcome inflation, but it has to restore its credibility. So, yes, I fear that we risk very high probability of a damaging recession that was totally avoidable."