The Federal Reserve isn’t doing its job fighting runaway inflation—and unless the central bank tightens monetary policy and raises interest rates “more aggressively,” the ongoing stock market sell-off could well turn into a full “economic collapse,” warned hedge -fund billionaire Bill Ackman on Tuesday.
The Federal Reserve has lost credibility as it has failed to stop raging inflation, said billionaire investor Bill Ackman, founder and CEO of hedge fund Pershing Square Capital Management, in a series of tweets on Tuesday.
“Markets are imploding because investors are not confident that the Federal Reserve will stop inflation,” and with consumer prices surging 8.3% on a yearly basis in April, inflation is way “out of control,” Ackman said.
The only way he sees inflation moderating is with more decisive action from the Federal Reserve, and if that doesn’t happen, the result will be a stock market crash that sends the economy into a recession.
Not only has the Fed already “lost credibility for its misread and late pivot on inflation,” but several current and former Fed officials have “waffled and made dovish remarks proposing a modest increase in rates and a pause in the fall,” Ackman points out .
The central bank’s current monetary policy and forward guidance are setting investors up for “double-digit sustained inflation that can only be forestalled by a market collapse or a massive increase in rates” and that is why there are “no buyers for stocks” in today’s markets, he says.
The current “downward market spiral” will only end when the Fed draws a “line in the sand on inflation and says it will do ‘whatever it takes,’” Ackman insists, adding that the central bank will have to continue raising rates “until the inflation genius is back in the bottle.”