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Recession warnings have come and gone in recent years without a downturn materializing yet, but for top economist Mohamed El-Erian this time feels different.<\/p>\n
The\u00a0disappointing July jobs report<\/a>\u00a0sent recession fears soaring, and markets are now \u201cscreaming\u201d two things: growth scare and policy mistake from the Federal Reserve, he told Bloomberg TV on Friday<\/a>.<\/p>\n That\u2019s as the market is fully grasping that the Fed may be late in its easing cycle, El-Erian said, after the central bank kept rates steady<\/a>\u00a0at its last meeting on Wednesday. <\/p>\n \u201cThis is the first time that I have a growth scare,\u201d he said.<\/p>\n The Fed\u2019s tightening cycle, which began in 2022, was the most aggressive in 40 years. Rates are now at the highest level since 2001. <\/p>\n As rates shot up, the consensus on Wall Street was that a recession would arrive by 2023. But the U.S. economy continued growing, and the consensus has shifted to a soft landing.<\/p>\n El-Erian, who is chief economic advisor at Allianz<\/a>, previously thought there was no reason to worry about a recession, but people underestimated the delayed effects of Fed rate hikes, which are hitting the economy harder now.<\/p>\n \u201cI really do worry that we may lose U.S. economic exceptionalism because of a policy mistake,\u201d he told Bloomberg TV.<\/p>\n Such American exceptionalism<\/a> in recent years has been characterized by U.S. outperformance in growth and financial markets. That has contrasted with other top economies like China and the eurozone, which have struggled to revive growth while investors have pulled out their capital and put it in the U.S.<\/p>\n Meanwhile, other economists have said markets are overreacting and don\u2019t see a recession<\/a> on the immediate horizon.<\/p>\n In a\u00a0note on Friday<\/a>, Capital Economics said a recession is unlikely and growth will even reaccelerate after a soft patch in the second half of this year.<\/p>\n \u201cSo we don\u2019t expect risk sentiment to deteriorate much further,\u201d senior markets economist Diana Iovanel wrote. \u201cThe upshot is that we doubt the economy will stand much in the way of the AI-fueled bubble picking up steam again soon.\u201d<\/p>\n<\/div>\nRecommended Newsletter: <\/strong>CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n<\/div>\n