Bill Ackman warned that decades-high inflation won’t return to normal levels anytime soon – and downplayed mounting concerns of a looming recession as he continued to call for higher interest rates from the Federal Reserve.

The hedge fund billionaire — who has previously accused the Fed of allowing inflation to “get out of control” by not raising rates quickly enough — said a “recession narrative” has taken hold and spurred stock market selloffs despite some positive signals in the US economy.

Ackman said the Fed now has little choice but to hike interest rates by next year to 4% to 5% — roughly triple the current level – to bring down inflation. Increases of that amount will “hopefully” be enough to lower prices, according to the billionaire.

“Inflation is not coming down soon,” the Pershing Square Capital boss said on Monday.

“While demand is moderating due to sticker shock and inflation as well as rising rates, overall demand remains strong,” Ackman added. “Inflation has become imbedded and is a daily experience, in headline news, and a diner table topic for all.”

Grocery shopper
Fears of a recession have weighed on stocks in recent days.
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The latest Consumer Price Index, set for release next week, will provide an updated view on whether the Federal Reserve’s effort to combat inflation is having the desired effect. The central bank hiked its benchmark rate at its sharpest clip since 1994 last month after the May CPI came in at a higher-than-expected 8.6%.

While discussing the possibility of a recession, Ackman asserted that key elements of the economy remain strong despite the recent slowdown. He pointed to consumer spending that has outpaced levels compared to last year, as well as a historically low national unemployment rate, rising wages and sizable household savings.

“We have a supply, not a demand problem. This does not seem like a set up for a true economic recession regardless of the favored definition,” Ackman said.

Ackman has been a sharp critic of the Fed’s response to inflation and a fierce advocate for sharp rate hikes to address the problem.

In June, the hedge fund titan said Fed Chair Jerome Powell and his colleagues had failed to respond to inflation quickly and decisively, causing investors to lose confidence in their plan. He called for aggressive rate hikes in the coming months “until it is clear that inflation has been tamed.”

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