Billionaire hedge fund manager Bill Ackman says inflation will continue to decline if the Federal Reserve acts more aggressively or the market sell-off turns into a full-on fall.
“Inflation is unlikely to materialize unless the Fed aggressively raises rates, or the stock market crashes, catastrophes of economic collapse and demand collapse,” Ackman said in a few tweets on Tuesday.
The parsing square hedge fund manager blamed investors’ lack of confidence for the 2022 market correction that the central bank could squash 40-year high inflation. He said market volatility would only end if the Fed “puts a line in the sand” on upward prices.
“If the Fed doesn’t do its job, the market will do the Fed’s job, and that’s what’s happening now,” Ackman added. “The only way to stop today’s rising inflation is through aggressive financial austerity or a collapse of the economy.”
The market has plunged into crisis this year as the Federal Reserve’s austerity measures to control inflation have raised fears of a recession. The central bank raised its benchmark interest rate by half a percentage point earlier this month, the most aggressive move yet. The S&P 500 fell nearly 18% in 2022, and last week the equity benchmark briefly sank into the bear market.
But Ackman believes that at the moment investors will encourage a faster Fed rate hike as inflation gets out of control.
“The market will rise when investors can be confident that the days of fugitive inflation are over. Let’s hope the Fed fixes that,” Ackman said.
Hedge fund managers say the Fed should raise its neutrality rate immediately and demonstrate its seriousness by promising to continue raising debt spending “until inflation returns to the genie bottle”.
The Fed has hinted at a similar 50 basis point rate hike in its next few meetings. The rate is currently observed at 0.75% -1%. The next meeting of the rate-setting Federal Open Market Committee is June 14-15.
In March 2020, at the height of the Covid epidemic, Ackman issued a stern warning to CNBC about the health crisis, saying “hell is coming” and urging the White House to close the country for a month. He then placed a 2 billion bet against the market.