It’s too soon for US policymakers to call victory on a soft landing as the economy moves from an inflation sweet spot into a more challenging environment ahead, according to Mohamed El-Erian.

The performance of the world’s largest economy in the third and fourth quarters was “remarkable,” El-Erian, the president of Queens’ College, Cambridge, told Bloomberg Television Friday. But “the big risk for the administration is that the economy slows this year because some of the drivers of last year’s growth are no longer there. And, secondly, inflation stops going down.”

Three specific risks could jeopardize the continued soft landing, the Bloomberg Opinion columnist said: Global supply-chain disruptions and delays to shipping; increasing pressure on domestic consumers as savings draw down; and a rockier-than-expected path to lower inflation.

“We need inflation to keep going down,” he said. “The market expects it will do so in a much more orderly way than I think will materialize, unfortunately.”

El-Erian also reiterated his call for the Federal Reserve to wait to cut its target rate until its June or July meetings, despite markets pricing nearly a 50% chance of a cut as soon as March. In December, the central bank’s median forecast implied three quarter-point cuts to come in 2024. Current pricing in the swaps market currently suggests about 135 basis points of easing or more than five quarter-point cuts. 

“This is a confusing time. Expectations are all over the place,” he said, adding the Fed’s forward guidance “has lost its power.”

On Friday, data showed the Fed’s preferred measure of underlying inflation — the personal consumption expenditures price index — cooled to 2.9% annually. Monthly inflation-adjusted consumer spending, meanwhile, grew 0.5% for a second month even as real disposable income growth slowed to 0.1%. 

This article was provided by Bloomberg News.