The risk of a recession “is getting higher and higher,” says veteran economist Mohamed El-Erian.

“My definition of a recession is a holistic definition. It goes well beyond two quarters of negative GDP,” said the chief economic advisor of Allianz and former CEO of PIMCO.

“The labor market is too strong. Consumer spending is too strong. Business balance sheets are too strong. We simply are not in a recession. Is the risk of recession high? Yes, it is high and getting higher,” El-Erian said on Yahoo Finance's "Influencers with Andy Serwer."

He highlighted the Federal Reserve tightening monetary policy into a slowing economy. The International Monetary Fund’s recent forecast shows all major areas of the global economy are slowing, calling conditions “gloomy and uncertain.”

El-Erian said in order to stop the U.S. from slipping into a recession there are four measures in particular tht need to be taken.

“First and foremost, we've got to get control of the inflation beast,” said El-Erian.

“That is a Fed that needs to act in not only tightening its monetary policy, but also regaining credibility. Its forward guidance right now is almost meaningless,” he said.

In July, the Federal Reserve announced a 75 basis point rate hike. Fed chair Jerome Powell said the central bank would be “data dependent” with its next steps — essentially ditching forward guidance. Markets rallied on Powell's unscripted comments.

El-Erian also said the government needs “to target fiscal policy more to protect the most vulnerable segments of our society. That has massive economic, social, and political consequences.”

He also suggested “pro-growth, pro-productivity reforms that need to be done, including to increase labor force participation,” in order to improve supply chains.

“Finally, let's not forget financial stability. Let's not forget how risk has not only morphed and migrated from banks to non-banks, but non-banks have been encouraged, by years of zero interest rates and massive and predictable liquidity injections, to go well beyond the native habitat in taking risk,” said El-Erian.

“So the non-banking sector is still offside. And we have to keep an eye on the financial stability risk because that could come back and harm the economy,” he added./ Yahoo Finance