Central banks are finally getting with the program and stepping up their fight against inflation, Allianz's Mohamed El-Erian said Thursday. "This is the great awakening of central banks to the fact that they are way behind inflation," the firm's chief economic advisor said in a CNBC " Squawk Box " interview. "Words are not enough; actions are needed, whether it's 75 basis points yesterday or today the Swiss National Bank … that's an illustration of that." El-Erian's comments came a day after the Federal Reserve raised rates by 75 basis points (0.75 percentage point) — its largest rate increase since 1994. Fed Chairman Jerome Powell also said the central bank could hike another 75 basis points in July if inflation stays high. Then on Thursday, the Swiss National Bank increased rates by a half-point, more than the market had expected. That announcement, coupled with another rate hike from the Bank of England, soured sentiment on Wall Street, with the Dow Jones Industrial Average tumbling below 30,000 for the first time since January 2021. "The Swiss National Bank always fights a strong currency," El-Erian said. "For it to get ahead of the European Central Bank and hike not 25 but 50 [basis points] shows you we are in the midst of a secular regime change. This is going to be fundamental to the economy and to markets." Those central bank moves come as global inflation has skyrocketed. In the U.S. alone, the consumer price index rose by 8.6% in May on a year-over-year basis — its biggest increase since 1981. Consumer prices in Europe, meanwhile, are at record levels. "It's about time we exit this artificial world of predictable, massive liquidity injections, where everybody gets used to zero interest rates," El-Erian said. "We are exiting that regime, and it's going to be bumpy."
