Bill Ackman: Fed rate may need to top 4% for 18 months to kill inflation

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Billionaire hedge fund manager Bill Ackman said on Tuesday that the economy is “pretty strong right now,” but the danger of inflation should prompt the Federal Reserve to take aggressive action to rein in price increases.

Speaking to CNBC, the founder and CEO of Pershing Square Capital Management predicted that this could include keeping the Fed’s key rate above 4% for up to 18 months.

In the short term, Ackman advocated that the central bank seek to bring its key rate down to “high three, four handles.” Recently, the Fed raised its rate another 75 basis points to between 2.25% and 2.5%.

“I think rates will have to stay above 4% for the foreseeable future, about 12 to 18 months, in order to kill that inflation,” he said. “The biggest risk for markets is that people don’t take this into account.”

Ackman argued that the current Fed rate only encourages people to borrow money because the lending rate is well below the current rate of inflation. He said this dynamic was “boosting the economy”.

The Pershing Square CEO also called current inflation “persistent”, saying price increases could continue to rise by “mid-single-digit” percentages “for a long time”.

“I think we’re heading into a period of consistently higher rates,” Ackman said. “We believe the wage inflation spiral is underway.”

This wasn’t the first time Bill Ackman had criticized recent Fed policy. Read what he and Elon Musk had to say following the central bank’s latest policy decision.

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