Fed officials including Chairman Jerome Powell have raised interest rates twice this year and have indicated two more are coming before the end of 2018. The CME FedWatch tool, which is based on Fed fund futures trading, put the chances of a September rate increase at 91.4 percent on Friday.
"I think that's way too high," the chief economic advisor at Allianz said on "Squawk Box." "If I looked only at the U.S., I would buy the 92 percent. But I think there are other things happening in the world."
El-Erian's probability of a rate hike was above 50 percent because of "headwinds from the rest of the world."
"If it is 92 percent, then I think we're going to see a lot more stress on various markets, including the global fixed income market, including the FX market. So that is a really important estimate," he said.
However, the political stakes may be different for the Fed this time around. In an interview with CNBC earlier this month, President Donald Trump expressed frustration with the Fed's recent move to raise interest rates and said the central bank could disrupt the U.S. economic recovery.
A day later, the president criticized the Fed monetary policy again in a tweet.
El-Erian said the Fed will likely attempt to ignore the president's criticism. He said the central bank will say, 'Let's assume it didn't happen' rather than say 'let's worry about what it does means if we move or not move.'"