Global economy will ‘collapse’ if the Fed doesn’t stop raising interest rates, says billionaire investor Sternlicht

“They will cause incredible calamities if they continue their action, and not only here, everywhere in the world”,


— Barry Sternlicht, CEO, Starwood Capital Group

Billionaire Barry Sternlicht, CEO and chairman of real estate investor Starwood Capital Group, has jumped on the bandwagon of people calling on the Federal Reserve to ease its aggressive interest rate hikes before something, somewhere, snaps .

Speaking during an interview with CNBC’s “Squawk Box” on Tuesday, Sternlicht said the Fed should take a break to assess the impact of its interest rate hikes on the economy, and that the chairman of the Federal Reserve, Jerome Powell, has already done “enough” to curb inflation.

The billionaire private equity and real estate investor said the Fed may have misunderstood the factors underpinning the global inflationary wave that has seen consumer price growth accelerate to an all-time high. fast in more than 40 years.

While others focused on rising prices for crude oil and other commodities, Sternlicht blamed the massive fiscal stimulus packages approved by Congress and Presidents Donald Trump and Joe Biden.

“Now that we’re gaining momentum and people are getting jobs and wages are going up, they want to crush it all and end the party,” he said.

Sternlicht also warned the Fed to pause and assess the impact of interest rate hikes on the real economy. Generally, higher rates take longer to trickle down to the underlying economy, while the impact on stock and bond markets can be felt almost immediately, he said.

“You’re going to see the economy turn around. They are going to have to lower rates because the economy is going to collapse. Who would run a business like this?

Sternlicht is not the first CNBC guest to complain about the aggressive monetary policy tightening seen this year. The Fed has already made three 75 basis point interest rate hikes this year, and Fed funds futures markets are pricing in more than a 60% chance of a fourth after the central bank’s November meeting. .

Late last month, Wharton professor Jeremy Siegel accused the Fed of making one of the biggest policy mistakes in its 110-year history by waiting too long to fight inflation.

And now, Siegel said, the Fed is aiming to make workers pay for its misjudgment.

See: Wharton’s Jeremy Siegel accuses the Fed of making one of the biggest policy mistakes in its 110-year history

Hopes that the Fed could be heading for a “pivot” to less aggressive rate hikes have helped US stocks soar since early October, with the Dow Jones Industrial Average DJIA,
+2.80%
on track for its biggest consecutive wins in more than two and a half years.

The S&P 500 SPX,
+3.06%
rose 2.8% on Tuesday to 3,780, the Dow DJIA,
+2.80%
gained 2.5% to 30,240 and the Nasdaq Composite COMP,
+3.34%
rose 3% to 11,139.

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