For industry leaders, Bill Ackman on inflation is as good as a prophecy. Inflation and interest rates have been engaged in a dance of death since last year, as rising prices put pressure on everyone from daily workers to corporations.
In May 2022, Billionaire investor Bill Ackman had warned that higher interest rates are the only way to stop the raging inflation that is climbing to new heights everyday. On May 24, he tweeted, “There is no prospect for a material reduction in inflation unless the Fed aggressively raises rates, or the stock market crashes, catalyzing an economic collapse and demand destruction.”
Bill Ackman on Inflation: An Inflammatory Prophecy
Nearly a month later, he has sounded the warning yet again on inflation and interest rates. He stated that inflation has gotten out of hand and investors are not taking it seriously enough. Ackman predicted that the federal funds rate might soar over 5% in the next year. He expects the Fed to raise interest rates by 0.75 basis points by July.
He reiterated that it is important for the Fed to take concrete action to rein in inflation to help people and businesses. The market has been wary of the interest rate hike as it is the first sign of an impending recession. The billionaire investor did not mince words as he called attention to the fact that the Federal Reserve is not being taken seriously by investors.
In May, the Consumer Price Index reached an all-time high of 12 months at 8.6%, as food, gas, and housing prices skyrocketed. The Fed then raised its benchmark rate by 0.75 basis points to between 1.5% and 1.75% earlier this month — its biggest single interest rate hike since 1994. Netizens learnt about the views of Bill Ackman on inflation via Twitter. He noted that there seems to be no stopping inflation as it continues to march onward. Ackman pointed out the subtle changes happening in the economy, like rising prices and how companies are preparing to hike the rate of goods to deal with inflation. He warned that “the potential for a future recession won’t stop the Fed from raising rates now.”
Last month, the hedge fund manager suggested that only aggressive monetary tightening or a collapse in the economy will do the trick. He stated that the markets will recover if the Fed can convince people that inflation will not go rogue and that they have a handle on things.
His tweets on Friday read “I think the bond market is misreading the @federalreserve. This is likely due to Powell’s communication style and some wishful thinking on the part of investors. Inflation is out of control and inflationary expectations have become unanchored. The Fed has finally come to this realization and has decided to act, and is playing catch up. However, Powell does not come across as someone who wants to go to battle against inflation. He seems uncomfortable and reluctant, almost apologetic, about raising rates.”
He went on to list the reasons supporting his observations and recalled Federal Reserve Bank of Atlanta President Raphael Bostic’s promise to do whatever it takes to bring inflation down to 2%. He also stated that along with the possibility of a future recession, the Fed must deal with their credibility problem as the market does not give due weightage to Federal Reserve Chair Jerome Powell or the governor’s statements.
Previously, Powell had appeared before the Senate Banking Committee a week after the Fed pulled the trigger on a three-quarter percentage point rate hike. At the time, he had assured the officials that although many factors affecting inflation are out of their control, there is still plenty of room to slow purchases of goods and services to a more sustainable pace.
