Billionaire Bill Ackman says the Fed needs to raise interest rates now to beat inflation and protect the economy

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(Kitco News) — Rising inflation will continue to threaten US stock markets and the economy, so the Federal Reserve needs to do everything in its power to cool rising prices, according to a billionaire investor.

In a flurry of tweets on Tuesday, Bill Ackman, a popular hedge fund manager at Pershing Square, said the US central bank needs to raise rates aggressively now.

“Until inflation is satisfactorily addressed, investors don’t know if and how long the Fed will need to cool inflation. Uncertainty is the enemy of markets especially in the short term,” Ackman said on social media. “By raising interest rates aggressively now, the Fed can protect and boost stock markets and the strength of the economy for all, while hampering livelihood-ravaging inflation, especially those less fortunate.”

The comments come as the S&P 500 continues to flirt with bear market territory as inflation at a 40-year high threatens corporate earnings. The S&P 500 is seeing some delay on Tuesday even as it trades under 4,000 points. However, many analysts said investors should look to sell off the rallies because prices could head lower as the US central bank looks to calm the economy to curb inflation.

“How does this downward market spiral end? It ends when the Fed puts a line in the sand on inflation and says it will do whatever it takes,” Ackermann said. “Markets are imploding because investors are not confident that FederalReserve will stop inflation. If the Fed doesn’t do its job, the market will do the Fed, which is what’s happening now.”

Currently, markets are looking for the Federal Reserve to raise interest rates by 50 basis points at the next three monetary policy meetings. According to the CME FedWatch Tool, markets see interest rates rising above 3% by the end of the year.

As investors fled the stock markets, safe haven assets like gold benefited, even as interest rates rose.

While stock markets are down about 18% so far this year, gold has outperformed, trading almost unchanged.

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