- Bill Ackman warned inflation is out of control, and investors aren't taking the Fed seriously.
- The Pershing Square boss expects the Fed to hike interest rates by 0.75 basis points in July.
- Ackman predicted the federal funds rate would soar past 5% next year.
Bill Ackman rang the inflation alarm, warned the Federal Reserve isn't being taken seriously, and suggested interest rates could soar past 5% next year.
"Inflation is out of control and inflationary expectations have become unanchored," the Pershing Square boss wrote in a Twitter thread on Thursday.
Ackman pointed to a sharp decline in short-term bond yields as proof that investors don't believe Fed Chair Jerome Powell will keep raising interest rates to combat inflation. He noted that several Fed governors have spoken out in an effort to address the central bank's credibility problem.
"A prediction: the Fed is serious," Ackman said. The billionaire investor added that he expects the Fed to hike rates by 75 basis points or more in July, and by 50 basis points or more in subsequent meetings, until inflation is clearly decelerating toward the target rate of 2%.
—Bill Ackman (@BillAckman) June 23, 2022
Soaring food, energy, and housing costs fueled an 8.6% rise in the Consumer Price Index (CPI) in May, marking its largest 12-month increase in four decades. The Fed reacted to the inflation spike by raising its benchmark rate by 0.75 basis points to between 1.5% and 1.75% earlier this month — its biggest single hike since 1994.
In his Twitter thread, Ackman predicted the federal funds rate would more than triple to over 5% next year.
"Inflation is continuing its march unabated," Ackman said, noting that CEOs across the country are lifting prices to offset rising costs. The hedge fund manager added that American consumers and companies have plenty of cash and little debt, and banks have maintained historically low loan-to-deposit ratios, so widespread recession fears won't be enough to curb inflation or make the Fed shy away from further hikes.
"The potential for a future recession won't stop the Fed from raising rates now," Ackman wrote.
The Pershing Square chief previously warned stocks would continue dropping until the Fed signals it's committed to tackling inflation.
"It ends when the Fed puts a line in the sand on inflation and says it will do 'whatever it takes,'" Ackman tweeted in late May. "And then demonstrates it is serious by immediately raising rates to neutral and committing to continue to raise rates until the inflation genie is back in the bottle."