US economy 'on the road to deflation', warns Pimco boss El-Erian

Mohamed El-Erian, the head the world's largest bond fund, has said the United States faces a one in four chance of suffering deflation and a double-dip recession.

US consumers and companies are holding on to their dollars in a way that was unthinkable just two years ago

“I do not think the deflation and double-dip is the baseline scenario, but I think it’s the risk scenario,” Mr El-Erian, chief executive officer at Pacific Investment Management Co. (Pimco), told reporters in Tokyo on Thursday.

"If you wonder how meaningful 25pc is, ask yourself the following question: if I offered you that I would drive you back to work, but there's a one in four chance that I get into a big accident, would you come with me?"

Mr El-Erian, who helps manage more than $1 trillion in assets, warned that action needed be taken quickly to prevent a economic slowdown. (more)