Fed to Cut Forecast, Europe Bailout is Failing

The heavy hitters were all over the media this wekeend. Mohamed El-Erian, chief executive at Pacific Investment Management Co., says that the Fed will cut its growth forecasts and Europe’s economic bailout is failing (Bloomberg)

He says that "slower-than- expected economic growth has fueled speculation the Fed will expand its program of Treasury purchases as it tries to keep borrowing costs low. Industrialized nations are eager to let their currencies weaken to aid their economies". The Fed will signal new easing measures, 'but probably not at this meeting,'

“It should and, I suspect, will,” reduce its growth projections.

On Europe, he comments that "concerns about Europe’s solvency are intensifying, pushing up risk measures for Greece, Ireland, Portugal and Spain to at or near danger levels",

“The failure to reduce risk spreads means that the public sector bailout is not working.”

“It raises the risk of renewed contagion,”