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‘The economy will crash’: Another billionaire investor urges Fed to pull back on rate hikes



Barry Sternlicht is the latest billionaire to criticize the Federal Reserve for its string of rate hikes, saying “the economy will collapse” if rates are not lowered.

The CEO of investment firm Starwood Capital Group said on Tuesday CNBC‘S Squawk . Box that the Fed should pause after the latest rate hike to see how they are impacting the economy. Fed Chairman Jerome Powell has done “enough” to manage inflation, and the best way forward is “just wait,” Sternlicht said.

“You will see the transformation of the economy. They will have to lower interest rates because the economy will collapse,” warned Sternlicht. “Who would run a business like this?”

He said rate hikes have an almost immediate impact on stocks and bonds, but the impact on the broader economy is often delayed. However, he said, there are already signs of an economic slowdown: a lack of initial public offerings (IPOs) and falling home values.

Sternlicht thinks the Fed misunderstood what causes inflation. In his view, it’s not the soaring prices of energy and commodities, but the stimulus packages the government puts in place as the economy reopens after the pandemic shutdowns.

“Now that we’re building momentum and people are having jobs and wages are going up, they want to stop the whole thing and end the party,” he said.

This year, the Fed has raised interest rates by 75 basis points three times – in June, July and September – in an attempt to cool the economy and slow inflation. Even so, inflation is still out of control. In August, inflation rate is 8.3% compared to a year ago, much higher than the 2% target.

Sternlicht is not alone in saying that raising interest rates could trigger a future recession.

Billionaire and veteran investor Carl Icahn believes that “recession or even worse“On the horizon, citing sky-high inflation in March. He’s recently rested his ominous prospect that the economy will deteriorate before inflation cools. Meanwhile, Jeffrey Gundlach of DoubleLine Capital keep perspective that the Fed should hold off on rate hikes when the economy weakens.

Elsewhere, the president of the World Bank David Malpass says that economies around the world could fall into recession as high interest rates impact the global economic recovery. Rebeca Grynspan, secretary general of the United Nations Conference on Trade and Development, repeat psychology that the recession could take its toll, even worse than the 2008 financial crisis.

Jeremy Siegel, Wharton professor and renowned economist, Fed said missed the opportunity by not tightening monetary policy before inflation started to escalate.

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