PIMCO's El-Erian urges preparing for global inflation
NEW YORK, April 10 (Reuters) - Central bankers must prepare for a shift in global inflation from a period of lower price pressures that is coming to an end, the co-head of the world's largest bond fund company said late on Thursday.
Mohamed El-Erian, co-chief executive officer of Pacific Investment Management Co., which oversees $750 billion in assets, said emerging economies whose cheap production has suppressed prices have reached a "critical mass," and will change the landscape of demand.
"The producers that were producing the cheap stuff are now huge consumers," El-Erian told Reuters after addressing the Money Marketeers of New York University.
The increased demand for goods globally will keep commodity prices historically high and volatile, he said.
El-Erian also said the Federal Reserve may stop cutting its benchmark interest rate when it reaches 2 percent.
"If the Fed gets what it wants, it will stop at two (percent)," he said in his address. "What the Fed is looking for is a period of stability in the system."
The federal funds rate is 2.25 percent. The Fed has lowered the short-term target rate by 3 percentage points since September amid signs of slower U.S. economic growth and increased stress in credit markets. (Reporting by Al Yoon and Jennifer Ablan; Editing by Jan Paschal)
