Mohamed El-Erian: The worst of inflation is behind us, so the Fed should stay in wait-and-see mode

• Rates are expected to remain steady throughout the year, with no cuts or hikes, as the worst of inflation is past its peak.
• The market misunderstands the ongoing shift at the Fed towards a reform-oriented approach under Warsh, moving away from rigid forward guidance.
• A fundamental change from an 'era of efficiency' to 'geo-economics' is underway, where economic outcomes are increasingly influenced by geopolitics, domestic politics, and national security, rather than just commercial considerations.

Mohamed El-Erian believes the worst of inflation is behind us, expecting rates to remain steady through the year. He highlights three major shifts the market hasn't fully internalized: a reform-oriented Fed, a move towards geo-economics, and the impact of AI. These changes, while potentially causing short-term volatility, are seen as beneficial for markets in the long run.