El-Erian Warns “Investors Are Underestimating Sudden Policy Shifts”

Separate comments last week from European Central Bank President Mario Draghi and Federal Reserve Chair Janet Yellen confirmed an ongoing change in the policy configuration facing their two systemically important central banks: The recognition of a transition in both economic conditions and prospects, along with questions about robustness and durability.
For now, Mohamed El-Erian notes, their response is to maintain a stimulative direction to their policies, and to use verbal guidance that avoids rocking the boat. Although it’s consistent with investor expectations, the forward-looking policy path may not be as secure and smooth as market pricing would suggest, however.
As we noted previously, if the past 20 years of global historical data is anything to go by, that ‘awakening’ of economic policy uncertainty is very bad news…

This post was published at Zero Hedge on Jan 23, 2017.