El-Erian says US recession risks are rising ‘unsettlingly’

Mohamed El-Erian, president of Queen's College at the University of Cambridge

Economist Mohamed El-Erian believes that the likelihood of a US economic recession has become increasingly concerning after being dismissed just a few months ago.

In an article published by Bloomberg, El-Erian explained that a combination of factors, including political uncertainty and financial market fragility, are coming together to threaten the world’s largest economy. He pointed out that warning signs have started to emerge recently, with the yield on 10-year US Treasury bonds dropping by about 70 basis points within weeks and oil prices falling below $70 per barrel.

El-Erian added that these developments coincided with the release of disappointing economic data, reflecting growing concerns over the direct consequences of former President Donald Trump's trade and public sector policies.

El-Erian noted that uncertainty surrounding the current administration’s policies has weakened confidence among businesses and households alike, casting a shadow over economic outlooks.

He warned that signs of economic weakness in the US are becoming evident, as low-income households struggle under mounting debt, businesses grow more cautious amid escalating political rhetoric, and the risk of a trade war between Washington and other countries continues to rise.

El-Erian also highlighted the lack of significant progress in curbing inflation, warning that this could push the US economy toward stagflation, a scenario that could deepen the economic crisis.