Hedge fund manager Michael Berry, known for predicting the 2008 financial crisis, says the Federal Reserve “has no intention of fighting inflation.” He added that “the Fed’s serial half-point rate hikes are necessary to get a lift before stocks and consumers run out of steam.”
Michael Berry on inflation and Fed rate hikes
Renowned investor and founder of investment firm Scion Asset Management Michael Berry shared his thoughts on the U.S. economy, inflation and rising interest rates on Thursday.
He is best known for being the first investor to foresee and profit from the U.S. subprime mortgage crisis between 2007 and 2010. He is featured in Michael Lewis’s book The Big Short on the mortgage crisis, which was made into a movie starring Christian Bale.
On Thursday, Berry tweeted:
The Fed has no intention of fighting inflation. Serial half-point hikes are needed to get a lift before stocks and consumers run out of steam.
“Same thing with rapid QT [quantitative tightening]. The Fed is eager to reload the monetary bazooka. That way it can come to the rescue and fund fiscal measures,” Barry added.
As of this writing, his tweet has been liked 13,800 times and retweeted over 2,200 times. Many Twitter users agreed with Berry.
One user wrote, “It’s true that the Fed would like to get space for more easing.” Another noted, “Not just the Fed. Look at all the central bankers around the world raising rates at the same time and at the same basis points. Canada and China raised rates around the 24th of this month by 50 bps. This is coordinated and they think it will work without any major collapse.” A third user opined, “Anyone who doesn’t blame the Fed for out-of-control inflation in the housing market is using a gaslight.”
The U.S. inflation rate jumped to a 40-year high of 8.5% in March and shows no signs of turning around quickly, according to data released this week. However, many believe inflation is much worse than the reported numbers.
On Thursday, “gold bug” Peter Schiff commented: “According to the government, consumer prices in March were up 8.5 percent from a year ago. Consumer prices are made up of the prices we pay for things we import and things we make ourselves. But in March y/y, import prices were up 12.5% and export prices were up 18.8%. That’s an average increase of 15.65%.”
St. Louis Federal Reserve Bank President James Bullard has repeatedly warned that the Fed needs to raise rates much faster to fight inflation. He told the Financial Times this week that it is a “fantasy” to think that the Fed can reduce inflation enough without raising rates to a level that limits the economy.
Meanwhile, Fed Chairman Christopher Waller believes that inflation peaked in March. On Thursday, he said: “I predict it’s pretty much peaking. It’s going to start coming down.”
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