Why Mohamed El-Erian worries about the 'collateral damage' of bringing inflation down

Mohamed El-Erian, Allianz SE Chief Economic Adviser & former PIMCO CEO, joins 'Influencers with Andy Serwer' to discuss inflation in the U.S. economy.

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ANDY SERWER: You said at one point recently I think, that you thought inflation had peaked. How did you arrive at that conclusion? Can you elaborate?

MOHAMED EL-ERIAN: Yes, the old fashioned way. So I look at the components of headline inflation, and in particular what's been driving it higher in recent times. And what we have right now is energy and food, in particular, are gonna be much weaker drivers of inflation, so the headline number is gonna come down.

But worsenly, the core number is going to stay stubbornly high. And that just speaks to an inflation process that has become more entrenched and has become more broad based in our economy.

ANDY SERWER: Right, transitory and trenched, broad based. So what is your prognosis when it comes to inflation, in terms of sustainability and severity?

MOHAMED EL-ERIAN: It will come down by the end of the year. It will be sticky. I'm looking for a core CPI in the 4.5% to 5.5% range, so well above the 2% target of the Fed. But what I'm most worried about, Andy, is the collateral damage that's gonna be associated with inflation coming down because the Fed has been so late in responding.