According to Bloomberg News, Bill Ackman the billionaire investor says that the battle against inflation is being lost by the Federal Reserve. He believes that the Federal Reserve must increase the key interest rate by more than 50 base points in March so that its credibility of it can be recovered.
Ackman said that a 50 bp move in the initial stages would incur a reflexive impact of minimizing the inflation anticipations, and this would moderate the requirement for many more aggressive steps that might be quite painful in the future. He expressed his views in a series of tweets on the microblogging site.
On facing pressure from within Congress and the public in general in tackling inflation, which is the highest ever since the 1980s, a group of officials in the current month expressed their views about hiking rates as early as March, citing the need to raise it four or even fives in the current year, expressing a clear deviation from what was decided just a couple of weeks back.
In December, the central bankers in the US predicted that they intend to increase rates thrice this year, thereby speeding up the process of tapering the asset purchases so that the program can be concluded in March mid. The Federal Reserve, has, however, has hiked rates not more than 25 basis points at one time since May 2000.
Ackman also said that it is the Fed’s loss as it is losing credibility as an effective inflation fighter, also adding that if there is a half-point hike in rate, it would just send shockwaves and awe in the market, which would reflect how it is resolving issues related to inflation.
According to the chief economist at Salomon Brothers who is known as “Dr. Doom“, said that he was to advise Jerome Powell, he would ask the Fed to adopt a “draconian” approach with an initial 50 basis point surge in short-term rates and signal that more is to come.
Bloomberg News also reports that JPMorgan Chase & Co, chief executive officer, Jamie Dimon revealed to the analysts Friday that it is quite likely that the Federal Reserve might as well escalate interest rates as many as 7 times so that inflation can be fought effectively, however, the CEO did not reveal how frequently that would be.
According to Bloomberg News, it is being apprehended that there might be four surges in rates in 2022 and more and more banks are reflecting their forecasts based on the same.
Powell in a pledge said this week that whatever is necessary to contain inflation will be done and even if that means that there has to be a hike in interest rate more over time, it will be done.
US consumer prices surged last year, which was the highest ever in the last forty years, destroying the purchasing power of the American households and paving way for an increase in interest rates.
