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Four keys to avoid a recession according to Mohamed El-Erian

Mohamed El-Erian, Allianz Chief Economic Adviser, joins Yahoo Finance Editor-in-Chief Andy Serwer to discuss the Federal Reserve's role in the U.S. economy and four keys to avoiding a recession.

Video Transcript

MOHAMED EL-ERIAN: We are now yet in a recession. We are not.

Is there recession-- risk of recession high? Yes, it is. High and getting higher.

So first and foremost, we've got to get control of the inflation beast. And that is a Fed that needs to act in not only tightening its monetary policy, but also regaining credibility. Second, we need to target fiscal policy more to protect the most vulnerable segments of our society.

Third, there's a whole host of progrowth, proproductivity reforms that need to be done. And then finally, let's not forget financial stability. Let's not forget how risk has not only morphed and migrated from banks to nonbanks, but nonbanks have been encouraged by years of zero interest rates and massive and predictable liquidity injections to go well beyond the native habitat in taking risk.

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