Citadel's Ken Griffin Says Fed Must Keep Rates 'Higher For Longer'

Zinger Key Points
  • “Powell and the team, I think, has made the right choice of staying higher for longer," says Citadel's Ken Griffin.
  • The hedge fund manager notes inflation has come down in goods, but remains elevated in the services sector. 

Citadel CEO Ken Griffin joined CNBC's "Power Lunch" Monday and discussed inflation, interest rates and the influence of AI on the American workforce.  

What Happened: The Federal Reserve held interest rates steady at its May meeting, marking the sixth consecutive meeting without a rate change. In an interview on CNBC this week, Griffin said the Fed is making the right decision by leaving rates unchanged as he believes rates should remain unchanged for the foreseeable future. 

"They've got to stay with higher rates to bring inflation back in check," Griffin said. "They need to bring inflation down over time." 

The billionaire hedge fund manager noted that inflation has come down in goods, but remains elevated in the services sector and therefore, "Powell and the team, I think, has made the right choice of staying higher for longer." 

Related News: Fed’s Stance On Inflation, Job Market Performance, And Peter Schiff Slamming Jerome Powell: Top Economic Updates This Week

Griffin acknowledged some sectors and industries are more likely to suffer when interest rates are high, including commercial real estate and highly-leveraged companies. 

"If you borrow money, you want to pay less in interest," the Citadel CEO said. 

On the other hand, companies in the financial sector including banks, money managers and insurance firms may benefit in a high-interest rate environment. Investors looking to gain exposure to the banking industry could purchase shares of the Invesco KBW Bank ETF KBWB or the iShares US Insurance ETF IAK, which offers exposure to companies in the insurance industry.

Looking Ahead: Griffin sees artificial intelligence as a strong tailwind for the economy as corporate executives lean into the adoption of AI in the workplace. 

"AI has really transformed the mindset of corporate America," the CEO said before he pointed to a growing number of companies and executives looking to technology and AI as a way to "jumpstart" productivity. 

"This really improves life for the average American and helps to keep our economy strong and robust," Griffin concluded. 

KBWB, IAK Price Action: At the time of publication Tuesday, Invesco KBW Bank ETF shares are up 0.5% at $53.78 and iShares US Insurance ETF shares are up 0.28% at $115.40, according to data from Benzinga Pro,

Image: Dan G from Flickr.

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Posted In: NewsFederal ReserveETFsartificial intelligenceCNBCFederal ReserveInflationKen Griffin
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