Bill Ackman Says Fed's 2% Inflation Target No Longer Credible: 'Can't Change Its Target Now, But...'

Zinger Key Points
  • The billionaire investor believes accepting near 3% inflation is a better strategy for a strong economy and job growth.
  • Fed hiked rates by 50 basis points on anticipated lines and projected hiking rates through next year with no cuts until 2024.
  • Ackman believes even if inflation gets back to 2%, it won’t remain stable there.

Billionaire investor and founder of Pershing Square Holdings, Ltd. PSHZF Bill Ackman believes the Federal Reserve’s 2% inflation target is no longer credible and accepting near 3% inflation is a better strategy for a strong economy and job growth over the long term.

“The @federalreserve 2% inflation target is no longer credible. De-globalization, the transition to alternative energy, the need to pay workers more, lower-risk, shorter supply chains are all inflationary. The Fed cannot change its target now, but will likely do so in the future,” Ackman tweeted.

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On Wednesday, the central bank hiked rates by 50 basis points on anticipated lines. Federal Reserve officials have projected hiking rates through next year with no cuts until 2024. The central bank sees itself hitting the terminal rate of 5.1% before it stops hiking – a level higher than the 4.6% mark it had forecast in September. Major Wall Street indices closed in the red following the announcement. The SPDR S&P 500 ETF Trust SPY closed 0.64% lower while the Vanguard Total Bond Market Index Fund ETF BND closed 0.24% higher.

“When asked, Powell recommitted to a 2% target, but admitted that examining a higher rate was a possible ‘longer-term project.’ Businesses need price stability, but can thrive in a world with 3% stable inflation,” Ackman added.

Strategy: The investor believes even if inflation gets back to 2%, it won’t remain stable there. “I don’t think the @federalreserve can get inflation back to 2% without a deep, job-destroying recession. 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 LT,” he tweeted.

Read Next: El-Erian Says Markets Not Buying Fed's Peak Rate Projection Of 5.1% By 2023 End: 'So Much For Credible Forward Policy Guidance'

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Posted In: Analyst ColorMacro Economic EventsNewsEconomicsFederal ReserveAnalyst RatingsBill AckmanInflation
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