• The Federal Reserve could keep interest rates higher for longer to tame inflation, Bill Ackman says. 
  • The billionaire investor tweeted Tuesday that the central bank will be open to a terminal rate above 3.4%. 
  • "Inflation has become imbedded in the economy and is front of mind for every American," he said. 

The Federal Reserve and Chairman Jerome Powell will keep benchmark interest rates higher for longer to tame inflation, Bill Ackman tweeted Tuesday. 

The billionaire hedge fund manager said inflation poses the biggest risk to the US economy, not Fed rate hikes, as high prices weigh on consumer and business confidence.

"The Fed understands this and therefore I expect Powell will show hawkish resolve on not only maintaining higher rates for longer, but also being open to a terminal rate meaningfully higher than 3.4%," Ackman predicted.

The current level is 1.50%-1.75%, and the Fed is expected to lift it another 75 basis points to 2.25%-2.50% on Wednesday.

Ackman's forecast comes as some on Wall Street expect the Fed to pivot to propping up growth instead of fighting inflation as higher rates weigh on the economy. On Monday, BlackRock said the Fed will cut rates next year after overtightening.

But Ackman warned such expectations will weaken the Fed's inflation fight and force it to tighten further: "The more the market believes that the Fed will immediately reverse course, the less effective raising rates will be in moderating inflation, and the more the Fed will have to raise rates. Inflation has become imbedded in the economy and is front of mind for every American."

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