Hedge fund manager Bill Ackman believes the Federal Reserve’s 2% inflation target cannot be reached without it. Serious pain for the US economy.

Founder and CEO of Pershing Square Capital in A Twitter Wednesday A “deep, job-destroying recession” would be needed to get inflation back to that level, which marks the U.S. central bank’s long-term goal of price stability.

“Even if it goes back to 2%, it won’t be stable there for long,” Ackman said on Twitter Wednesday after the Fed’s latest rate hike. “Accepting 3% +/- inflation is the best strategy for a strong economy and long-term job growth.”

The Fed raised interest rates by half a percentage point to 4.25%-4.5% on Wednesday, the seventh and final time monetary policymakers have raised the benchmark policy rate until 2022.

This year’s rate hike of 4.25% is the highest since 1980.

Following the decision, Fed Chairman Jerome Powell said that further increases are likely in the new year, and the chairman emphasized that the central bank will continue to tighten monetary conditions as long as necessary to meet its inflation target.

“Changing our inflation target is something we haven’t considered, and it’s not something we’re considering,” Powell said in a press conference with reporters Wednesday afternoon. “Now is not the time to think about that.”

New projections from the Fed released Wednesday suggest policymakers expect the unemployment rate to rise to 4.6% by the end of next year, while inflation, as measured by core PCE, has slowed to 3.5%. Those figures stood at 3.7% and 6%, respectively.

The Consumer Price Index (CPI) rose at a 7.1% annual clip in November, government data showed on Tuesday, with the latest PCE reading – the Fed’s preferred measure of inflation from business price sources – up 6% from a year earlier in October. Earlier.

Each is currently at least three times higher than the Federal Reserve’s price stability goal.

Ackman has previously expressed doubts about the Federal Reserve’s success in fighting inflation. In Pershing’s quarterly call with investors last month, the hedge fund said inflation will remain structurally higher, along with rising interest rates — each of which poses concerns for equity markets.

“Globalization, the transition to alternative energy, the need to pay workers more, lower exposure, shorter supply chains are all inflationary factors,” Ackman said Wednesday. “The Fed cannot change the target now, but it may do so in the future.”

Earlier this year, Ackman called for a full percentage point hike in July, advocating aggressive Fed action. His firm made a big profit from its bets on high interest rates, with nearly $2 billion this year and $5.2 billion since the start of Covid-19.

The Pershing Square leader is not the only voice on Wall Street who believes the Fed’s inflation outlook is unrealistic due to supply chain issues, labor imbalances and geopolitical tensions.

William ‘Bill’ Ackman, CEO and portfolio manager of Pershing Square Capital Management, speaks at the Son Investment Conference in New York City, US, May 8, 2017. REUTERS/Brendan McDermid

BlackRock CEO Larry Fink said earlier this month at the New York Times consensus book conference in New York City that investors can live with 3-4 percent and 2-3 percent inflation — something he cited as timing. To the detriment of the economy

Garji Chowdhury, head of iShares Investment Strategy Americas, noted in a note Wednesday that areas where inflation will continue to rise are in CPI services such as rents and home prices.

“The service components in the CPI will be more sticky – services price growth will take longer to lag because they are assumed to reflect wage growth and their prices are not adjusted like goods,” Chaudhuri said. “As a result, going from 5% to 2% year-on-year inflation will not be as easy as going from 9% to 5% inflation.”

In the past week, Baird’s Ross Mayfield has seen inflation rise from 4% to 2%.

Mayfield wrote in the memo, “There could be a major conflict between businesses and the labor market.” “Ultimately, we think they’ll slow down and then take a long time to look at the terrain and the potential impact.”

Alexandra Semenova is a Yahoo Finance reporter. Follow her on Twitter. @alexandraandnyc

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app Apple Or Android

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedInAnd YouTube



ودجت أحدث المقالات للصفحة الرئيسية تظهر على الصفحة الرئيسية فقط

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *