Allianz's El-Erian says the Fed needs do two things to regain confidence.

By The Exchange Team

Mohamed El-Erian, senior economic counsellor at Allianz, says the Fed needs to do two more things to regain its confidence.

Fed Chairman Jerome Powell said the U.S. economy may experience "some pain" last week at Jackson Hole.

“The more Fed officials say it, the more the market prices it in, but mostly the fixed income markets,” El-Erian added.

“Other markets are hoping somehow that we are in a cyclical moment, not in what I think is more secular and strategic.”

El-Erian praised the Fed for its clear and consistent message, but said it must do two additional things to bolster its forward guidance.

“One is to explain to the market why its analysis was so wrong and what it's done about forecasting,” he said.

"Change its framework. We have a framework for deficient aggregate demand, but we have deficient aggregate supply."