Bill Ackman says the Fed needs to hike rates to at least 4% to get inflation under control

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Bill Ackman says the Fed needs to hike rates to at least 4% to get inflation under control
30 Jul 2022
min read

News Synopsis

According to billionaire investor Bill Ackman, the Federal Reserve will need to raise interest rates to at least 4% in order to control inflation.

Despite the optimism of some investors, the chief executive of Pershing Square Capital claimed that the latest 75 basis point rate increase by the US central bank would not be sufficient to control skyrocketing prices.

"I don't think there is any prospect of getting back to 2% without materially higher rates, 4% or more, which are maintained at these levels for extended periods," Ackman tweeted Friday.

Earlier this week, the Fed increased its target funds rate to a range of 2.25 percent and 2.5 percent, but Chair Jerome Powell stated that future policy decisions will be guided by data, implying that the Fed may slow the rate of rate increases if economic indicators weaken.

Following Powell's remarks, stock markets rose, but Ackman claimed that investors' bullishness appeared premature. The inflation rate, which in May reached a 41-year high of 8.6 percent, will probably not be controlled by interest rates of 2.5 percent, he continued.

"A neutral rate of 2.25 to 2.5% only makes sense in a world with 2% stable inflation," he said. "It makes no sense in a world with 9%, 6% or even 4% inflation."

 

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