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El-Erian pushes for a 25 basis point increase and says the Fed shouldn’t blink

(Bloomberg) — Mohamed El-Erian called on the Federal Reserve to raise its key interest rate by 25 basis points at this week’s meeting and tie the move to an assurance of its commitment to financial stability.

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“The worst thing they can do is blink an eye — in the face of financial instability,” El-Erian, chief economic adviser at Allianz SE and Bloomberg Opinion columnist, told “Fox News Sunday.”

A 25 basis point increase is necessary “because we have an inflation problem and we need to overcome this inflation problem,” he said. At the same time, the Fed needs to “credibly remind people that we have multiple tools: interest rate policies to deal with inflation and other tools to deal with financial stability.”

Fed policymakers will begin a two-day meeting on Tuesday, the first since the collapse of Silicon Valley Bank and the ensuing fallout shocked markets and fueled speculation that the U.S. central bank may pause its rate hikes.

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