Ackman’s Insight on Inflation and Interest Rates:
Bill Ackman, a prominent billionaire investor and founder of Pershing Square Capital Management, has expressed his belief that long-term interest rates in the United States will continue to climb. He emphasizes this view in light of his observation that inflation remains stubbornly high.
Fed’s Monetary Policy and Ackman’s Response:
Ackman’s comments follow the recent decision by the U.S. Federal Reserve to maintain interest rates at their current level while adopting a hawkish monetary policy stance. Ackman contests the notion that the long-term inflation rate will revert to 2%, contrary to Chairman Powell’s target.
Factors Influencing Inflation and Rates:
Ackman points to various factors contributing to inflationary pressure, including potential increases in workers’ wages due to ongoing strikes among autoworkers. He also highlights the impact of escalating energy prices on inflation.
Projections on Fed’s Interest Rate and Treasury Yield:
According to updated quarterly projections by the U.S. central bank, the Fed’s benchmark overnight interest rate may see another hike this year, reaching a range of 5.50%-5.75%. Ackman suggests that considering long-term inflation rates, real interest rates, and term premiums, a 5.5% yield for 30-year Treasurys appears appropriate. He expresses surprise at the current low levels of long-term rates.
Bill Ackman’s insights into the trajectory of interest rates are underlined by his anticipation of sustained inflation and its potential impact on the economy.