Hedge-fund manager Bill Ackman says the Federal Reserve should lift interest rates by 75 basis points on Wednesday, and pledge to increase rates by the same in July as well.
Ackman, the founder and chief executive of Pershing Square, said the Fed could restore market confidence with aggressive action to tame inflation. He added that 100 basis point rate hikes in June and July would be even better.
Over Twitter, he said the Fed will have to lift rates eventually to between 5% and 6%, and that it was “hopium” to expect that taking the federal funds rate to 4% would be sufficient.
In late May, Ackman said his Pershing Square fund had already a monetized a “chunk” of a derivatives bet shorting short-term Treasurys, for a profit of $1.4 billion. The more rates rise, the worse short-term Treasurys perform.
Markets have almost completely priced in a 75 basis point hike from the Fed, after the last inflation report showed a 8.6% year-over-year rise in consumer prices, and a report in The Wall Street Journal suggesting the Fed could raise rates by that amount.
As Treasury yields
have soared, stocks have slumped. The S&P 500
has dropped 22% this year.
Ackman also has been making his case for aggressive rate hikes in advisory meetings to the New York Fed.
Not to be outdone, the so-called bond king, Jeffrey Gundlach of DoubleLine Capital, says the Fed should boost rates all the way to 3% — a 200 basis points increase.