Noted economist Mohamed El-Erian said the U.S. economy is facing higher odds of a recession and stagflation after a series of high-profile bank collapses last month.
“The flashing red light resulting from a speed-of-light run on the U.S. banking system, or what economists broadly refer to as financial contagion, is behind us,” the longtime economist wrote in the Financial Times Monday. “Yet it is too early for policymakers to declare mission accomplished.”
With the recent collapses, the banking system will be more cautious to issue credit, he warned. Meanwhile, Americans reportedly have moved away from bank deposits and are placing their money in market funds which offer higher yields as the Federal Reserve continues to raise interest rates.
“Instead, red has become a flashing yellow due to the slower-moving economic contagion whose main transmission channel, that of curtailed credit extension to the economy, increases the risk not just of recession but also […]
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