Billionaire investor Bill Ackman believes that the Federal Reserve is set to cut interest rates as data shows that inflation is on its way down.
In a new CNBC interview, the founder and chief executive of the hedge fund Pershing Square Capital Management says that a minimum, he sees the Federal Reserve announcing three rate cuts of 25 basis points.
According to Ackman, the cost of capital is “very high” at the moment and the Federal Reserve must make a move soon to keep the economy from entering a period of contraction.
“I think we have three [rate cuts]. Remember, three rate cuts are 75 basis points off of 5.25% to 5.50%. That is not a significant move.
Three rate cuts would be a 15% reduction in rates. Right now with inflation cooling very meaningfully, the real cost of money is very high right now. So I think [the Fed] is going to have to move early. They can certainly do more than three [rate] cuts.”
The billionaire also says the stock market may rally if the Fed abruptly reverses its tight monetary policies.
“I think it’s good for equities as long as they bring rates down fast enough to avoid a meaningful recession.”
Ackman is not the only one who expects the Federal Reserve to cut rates this year. Banking giant Barclays reportedly predicts that the Fed will start slashing interest rates in March by 25 basis points at every other meeting.
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