An influential economist thinks the Fed is playing with fire by keeping interest rates higher for longer.

According to Queens’ College president Mohamed El-Erian, there’s a one-in-three chance that the Fed will fail to adjust its policies in time to avoid a recession. “Needless to say, the risk here, which I put at 35% probability, is that the Federal Reserve waits too long [to cut rates]," he said.

The economist thinks the current policy will damage "economic growth and financial stability, imposing yet another disproportionately large burden on small businesses and vulnerable households.”

El-Erian's remark is a response to the central bank’s latest decision to keep interest rates on hold and its forecast of only one rate cut this year. In his view, the Fed has boxed itself into a corner by focusing on an arbitrary and unscientific 2% inflation target.

Rather than being proactive, the Fed has “turned into a play-by-play commentator,” El-Erian said in April.

El-Erian isn’t the only one who’s criticizing the Fed’s slow reaction time.

Sven Henrich, a financial market strategist and founder of Northman Trader, reminded his audience on social media that the Fed is “under the same leadership that waited too long to raise rates” when inflation was spiking in 2021 and 2022.

“Now they’ve set themselves up for another credibility blow by either waiting too long or to again [having] to flip flop on a dime as data deteriorates,” Henrich said.

A self-inflicted wound

El-Erian and Henrich join a growing chorus of central bank skeptics who’ve criticized the Fed’s lack of action.

As far back as seven months ago, Duke University professor Campbell Harvey said the central bank’s 11 rate hikes were a major overreaction to an inflation surge that happened a year earlier.

His reasoning was that while inflation remains elevated, more than a third of the increase was coming from housing, the largest CPI category.

“The largest component is housing, it’s more than a third of the CPI, and it operates with a lag. So what’s reported in the CPI today is housing inflation from last year,” Harvey told CNBC’s Squawk Box.

“Policy needs to be determined based upon real-time data, data that’s forward-looking, not data from the past,” he said.

“Recession at this point is a self-inflicted wound,” Harvey explained. “If you look at what’s happening, the tightening is very severe, and it’s not just the short rate going up so quickly, it’s the long rate, too,” he said, referring to rising Treasury yields that are driving up the cost of financing.

While Fed officials believe the recession risk is low, the central bank’s researchers tell a different story. According to the New York Fed, the chance of a recession in the next 12 months is essentially a coin flip.

Meanwhile, a Harris poll conducted for The Guardian found that more than half of Americans already feel the economy is in a recession. That’s because ordinary Americans are feeling the brunt of the Fed’s high-rate policies, as well as the growing burden of housing costs.