U.S. Markets closed

Fed's timidity on rates poses THIS risk: El-Erian

Fed's timidity on rates poses THIS risk: El-Erian

What the Federal Reserve is likely to do with interest rates is not what it should be doing, former Pimco co-CEO Mohamed El-Erian said Tuesday.

The terrible March jobs report-released when the stock market was closed for the Good Friday holiday-will likely mean a rate hike in September, not June, predicted El-Erian, chief economic advisor at Germany-based Allianz, the parent company of Pimco.

When the Fed does move, it will do so cautiously, he added, with policymakers stressing the "relatively shallow path" away from near-zero percent rates to end-cycle levels "lower than the historical average."

"But what they should do is something different," El-Erian argued. The Fed needs to be less timid, he said, "and recognize the main risk to this economy comes from mounting financial imbalances that could threaten instability down the road."

More From CNBC