El-Erian says the market's reaction to Powell's remarks shows the Fed's communication challenge: "The more the president slants his Dovish remarks..."

Allianz chief economic adviser and renowned economist, Mohamed El-Erian, expressed concern about the market's reaction to Federal Reserve Chairman Jerome Powell's speech, Wednesday, in which he said the central bank could slow the pace of rate hikes. as of December while noting that there is still a long way to go to control inflation.

El-Erian said the market reactions highlight the communication challenges facing the central bank. “The softer the president slants his remarks, the greater the easing in financial conditions and, potentially, the greater the risk of hitting the inflation target,” El-Erian tweeted.

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Reacting to Powell's indication that the pace of rate hikes may soon slow, the Nasdaq closed more than 4% higher while the Dow Jones and S&P ended Wednesday up more than 2%. The SPDR S&P 500 ETF Trust SPY closed up 3.14% on Wednesday, while the Vanguard Total Bond Market Index Fund ETF BND closed up 0.78%.

Repeated warnings: This isn't the first time the famed economist has warned of the market's reaction to the Fed's communication. In late October, El-Erian highlighted on Twitter how markets were happily embracing the idea that the central bank would slow its up cycle. "The resulting self-reinforcing easing of financial conditions may not be what the #Fed wants to see at this particular juncture," he said.

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