El-Erian said that the U.S. central bank has “conditioned the market to such an extent that every time the Fed tries to step back, the market forces them back in” by selling off and tightening financial conditions.
Former Bank of England policy maker Paul Tucker agreed that the financial markets have come to expect periodic support from central banks after years in which monetary policy makers effectively delivered just that.
“I wait, longing for a central banker to do for financial stability what Paul Volcker did for inflation, which is to break that psychology that you, the capitalist markets, are actually utterly dependent on the Federal Reserve and other central banks, propping up prices come what may,” Tucker said.
This article was provided by Bloomberg News.