By Sophia Herbst Bayliss
(Reuters) – Investor William Ackman, whose views are widely watched on Wall Street, said on Thursday that the US central bank’s ultra-easy monetary policy had created a “classic bubble” and that he believed the Federal Reserve would need to tighten interest rates further. quickly to fight inflation.
“We are in a classic Fed-led bubble,” Ackman, who runs hedge fund Pershing Square Capital Management, said at a conference sponsored by S&P Global Ratings.
Ackman was speaking days after the government announced that US consumer prices in October rose 6.2% over the past 12 months, topping many economists’ expectations.
“Every indicator is flashing red,” Ackman said, citing price hikes in real estate, the art market and the stock market.
He called inflation the biggest risk for his hedge fund this year and said he expected the central bank to have to raise interest rates soon, echoing warnings he made on Twitter several weeks ago.
“I think the Fed is going to have to tighten more quickly,” Ackman said, adding that he saw little reason to keep interest rates at their current low levels, arguing that easy monetary policy was not getting people back into the workforce.
He also said that higher prices are being fueled by structural changes and that recent increases may not be temporary, some policymakers, economists and many companies said.
Ackman said ESG’s initiatives, including a shift to cleaner energy and a demand for higher wages, are here to stay and are expensive, noting that they will fuel higher prices for some time.
Ackman said on Twitter last month that he had been invited to give a presentation to the Federal Reserve Bank of New York to share his views on inflation, and that he said policymakers should “step back immediately and start raising rates as soon as possible.”
He said again Thursday that he hedge his portfolio, fearing that higher rates would negatively affect the hedge fund’s long-only equity portfolio. Ackman’s Pershing Square Holdings fund is back 26.1% since January after a 70.2% increase last year.
(Reporting by Sophia Herbst Baylis and Megan Davis; Editing by Keizo Nomiyama and Dan Grebler)