Expert Slams Fed For Failing To Curb Inflation, Warns Of Possible Market Crash

Federal Reserve building entrance
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News & Politics
Damir Mujezinovic

Billionaire investor and hedge fund manager Bill Ackman, the CEO of Pershing Square Capital Management, issued a chilling warning on Tuesday.

According to Ackman, inflation in the United States is "out of control" and the Federal Reserve is not doing enough to curb it.

Unless the Fed changes its policy, he warned, a market collapse is inevitable.

What Ackman Said

Ackman shared his thoughts on the state of the American economy via Twitter, as reported by The New York Post.

In a thread, Ackman argued that the Federal Reserve's inability to contain inflation has had a major impact on the market, spooking investors.

"Markets are imploding because investors are not confident that the @federalreserve will stop inflation," Ackman noted.

"If the Fed doesn’t do its job, the market will do the Fed’s job, and that is what is happening now," he stressed,

The Dow Jones Industrial Average is down almost 13 percent this year, while Nasdaq is down 30 percent. The S&P 500 is doing even worse.

What Should Fed Do?

According to Ackman, officials don't have too many options at this point, given the low unemployment rate and supply chain issues.

The Fed, the billionaire argued, simply has to raise interest rates if it wants to avoid an economic catastrophe.

"There is no prospect for a material reduction in inflation unless the Fed aggressively raises rates, or the stock market crashes, catalyzing an economic collapse and demand destruction," he wrote.

Fed Has No Credibility, Ackman Says

Bill Ackman during a hearing
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Federal Reserve Chairman Jerome Powell and other top officials now acknowledge that supply chain issues have had a major impact on the economy, after claiming for months that inflation was simply "transitory."

This month, the Fed raised interest rates by 0.5 percent and announced additional hikes in June and July.

But, according to Ackman, the Fed has "already lost credibility" by failing to address the issue on time.

"How does this downward market spiral end? It ends when the Fed puts a line in the sand on inflation and says it will do 'whatever it takes.' And then demonstrates it is serious by immediately raising rates to neutral and committing to continue to raise rates until the inflation genie is back in the bottle."

What Is Biden Doing?

President Joe Biden delivers remarks
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President Joe Biden has made it clear that combating inflation is his top priority, but his administration has been criticized for its handling of the economy.

As The New York Times reported, Biden has in recent weeks touted reducing the budget deficit and claimed the shrinking would help reduce inflationary pressure.

But several experts told the paper that the relationship between deficits and inflation is more complex than Biden is making it seem, suggesting that the president is misleading the public.