El-Erian: Interest rates, inflation moving in right direction, but lower prices 'not going to happen'

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Key Square Group founder Scott Bessent and chief economist at the America First Policy Institute Michael Faulkender discuss former President Trump's agenda on 'Kudlow.'

A prominent economist and educator is warning that Americans squeezed by the highest inflation rates in four decades are unlikely to see prices come down in the future.

Allianz chief economic adviser Mohamed El-Erian said Sunday that while inflation is cooling, what that means is the rate of price increases has slowed. It does not mean, he explained on CBS' «Face the Nation,» that prices will eventually decrease to levels seen before inflation spiked in 2022 in the aftermath of the COVID-19 pandemic. 

«Well, we know the Federal Reserve is meeting later this week, may move on interest rates again, since inflation is around or getting close to that 2% target, but for average people, they see housing prices are high. They see grocery prices are still high. Where's the scenario where those prices actually come down?» asked host Margaret Brennan. 

«Yeah, and that's what everybody's expecting, but it's not going to happen.» El-Erian replied.

WHY ARE CONSUMERS PESSIMISTIC ABOUT THE ECONOMY WHILE INFLATION IS COOLING?

Mohamed Aly El-Erian, chief economic adviser for Allianz, gestures during an event at the University of Cambridge, United Kingdom, on Nov. 25, 2021. (Hollie Adams/Bloomberg via / Getty Images)

«Look, the good news is, interest rates will continue to come down. The good news is, inflation, which is the rate of increase of the cost of living, will come down. But it's very hard to bring down prices, and that's one political problem, is when you tell people inflation is coming down, in their head, they think prices are coming down, not the rate of