According to Hedge fund manager, Bill Ackman, the Fed will not reach it's goal on decreasing inflation to 2% unless the U.S. economy goes through "severe pain". He claims that it would take a "job-destroying" recession for the economy to reach that goal. He said in a tweet, "Even if it gets back to 2%, it won’t remain stable there for the long term. Accepting 3% +/- inflation is a better strategy for a strong economy and job growth over the long term". This is in response to the Fed raising interest rates up a half of a percentage point. Chairmen Jerome Powell says that there are going to be more hikes than just what we have experienced this year so far. There has been a 4.25% increase on interest rates this year alone, that being the highest its ever been since the 1980's.
The central bank is focusing it's resources to tightening the financial conditions so they can reach their inflation goal of 2%. Powell also went on to say that changing the goal is something they are not thinking about and will not think about. The Fed also is forecasting for unemployment to increase to 4.6% by the end of next year. PCE is also projected to fall as they are currently forecasted for 3.5%, while it currently sits at 6%. Ackman has expressed doubts before, but thanks to the economy not responding the way they want it to, he now doubts them even more and has started making these claims.
https://finance.yahoo.com/news/bill-ackman-fed-inflation-recession-225552079.html
Very interesting piece! Two questions. 1. Do you think that the Fed should increase interest rates to deal with the high levels of inflation or let the economy sort itself out? and 2. What factors do you think contributed to the high levels of inflation we are currently seeing?
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