Bill Ackman, the billionaire and manager of the Pershing Square hedge fund, criticizes the Fed’s policy and says that instead of raising interest rates, it is possible to encourage immigration to the US. In tweets on Twitter, Ackman wrote that raising interest rates is “a blunt tool that will destroy consumer demand and lead to a recession” and that “inflation The salary will probably continue until the interest rate rises to restrictive levels.”
So what is the solution? According to Ackman, whose fortune is estimated at $2.5 billion, “Inflation can be reduced by reducing demand and/or by increasing supply. Doesn’t it make more sense to moderate wage inflation with increased immigration than by raising interest rates, destroying demand, driving people out from work and causing a recession?” He even added that it is possible to “direct the immigration policy to achieve important political goals such as speeding up the bringing of Russian talents to the US. Why don’t we?”
In practice, the idea is that by increasing the availability of new workers in the United States, businesses will be under less pressure to fill open positions and therefore will not have to raise wages along with the surge in inflation.
Inflation can be mitigated by reducing demand and/or by increasing supply. The @federalreserve can only reduce demand by raising rates, a very blunt tool. Wage inflation will likely continue until rates rise to restrictive levels.
— Bill Ackman (@BillAckman) September 23, 2022
Currently, in the US there are about two vacancies for every person looking for a job, unemployment in the US is close to a historic low and stands at only 3.7% and inflation in the US stands at 8.3% as of August.
So why is Ackman contradicting himself a bit? Because just 3 months ago Ackman called the Fed to raise interest rates much faster and said that the Fed should raise interest rates by 1% and that the Fed would have to reach an interest rate of 5-6%. So, in June, he proposed to the Fed to raise the interest rate to 3%, while the Fed reached an interest rate of 3%-3.25% only in the last week, in September.
In any case, at the beginning of last month Ackman said that the markets are expected to be a “buying opportunity”. According to him, this will happen “as soon as people realize that the Fed does not have to keep raising the interest rate and will soon lower the interest rate.” He believes that inflation will drop within a year to 3.5-4% (compared to 8.3% now). “I think inflation is going down. As soon as people realize that the Fed doesn’t have to keep raising interest rates and will soon lower interest rates – that will be a buy signal for the markets.”
He expects Fed Chairman Jerome Powell to keep interest rates higher for longer: “I think they said they were going to. What they should do is raise the interest rate and leave it there for an extended period. Our biggest concern is inflation, which is why we wanted the Fed to raise interest rates.”
Comments to the article(0):
Your response has been received and will be published subject to the system policy.
for a new comment
Your response was not sent due to a communication problem, please try again.
Return to comment