Bill Ackman Says Fed Must Aggressively Raise Rates Now to Combat Inflation or Economy Will Collapse

May 24, 2022 12:40 PM EDT

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Hedge fund manger Bill Ackman of Pershing Square Capital took to Twitter Tuesday to vent his frustration at the Fed as inflation soars and stocks collapse.

Inflation and inflation expectations are "out of control," Ackman states. Unless it is met with aggressive monetary tightening the economy will collapse, he added.

Given the wage-price spiral that is currently underway, Ackman said there is no way for the Fed to see a material reduction in inflation unless they aggressively raises rates. That is unless the stock market crashes, which will catalyze "an economic collapse and demand destruction."

Ackman said the Fed has already lost credibility for its misreading and late pivot on inflation.

The hedge fund manager said raising rates by 200 to 300 bps to compact 8% inflation with 3.6% employment has "no economic precedent" and is setting us up for "double-digit sustained inflation that can only be forestalled by a market collapse or a massive increase in rates."

Ackman said there are now no buyers for stocks given the Fed's credibility problem and surging inflation.

He said this could all end and stocks can surge if the Fed puts a line in the sand on inflation and says it will do "whatever it takes." They can follow-through by immediately moving rates to "neutral" and keep raising rates until "the inflation genie is back in the bottle."

He said given that stocks are now cheap again, the market will soar "once investors can be confident that the days of runaway inflation are over."



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