Renowned economist Mohamed El-Erian has voiced concerns over the increasing late payments on credit cards and auto loans in the United States, sparking discussions on the economic implications.
What Happened: On Sunday, El-Erian took to X to share his views on an article from the Wall Street Journal. The article highlighted the rising trend of late payments on credit cards and auto loans, which has alarmed Wall Street. El-Erian’s tweet sparked a debate on whether this financial weakness is confined to lower-income households or is spreading upwards.
Wall Street is alarmed as signs of Americans struggling to keep up with bills emerge, especially among lower-income borrowers, reported the Journal.
Credit card delinquencies have reached their highest level in over a decade, and car loan charge-offs have also surged. Bank executives report rising delinquencies, with major lenders like Citigroup and Ally Financial warning of increased financial strain, while investors worry about a potential recession.
Why It Matters: El-Erian’s post comes amid discussions on the Federal Reserve’s anticipated rate cuts. Recently, El-Erian outlined key expectations and market pricing ahead of the Federal Reserve’s policy meeting.
The rising late payments could indicate a weakening economy, as suggested by economist Peter Schiff. Schiff warned that the Federal Reserve’s rate cuts might not prevent a recession.
Meanwhile, the latest inflation statistics for August have given the Federal Reserve the green light to proceed with an interest rate cut. The size of the cut, however, remains a topic of discussion.
Photo by International Monetary Fund on Flickr
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This story was generated using Benzinga Neuro and edited by Shivdeep Dhaliwal
