Fed Should Pause Rate Hikes As Banking Crisis Isn’t yet Over

  • Bill Ackman urged the Fed to hold off its inflation battle – calling for a pause in interest-rate increases.
  • “This banking crisis remains unresolved and higher rates won’t help,” the billionaire investor said.
  • The US central bank is due to announce its latest monetary-policy decision Wednesday amid the continuing banking turmoil. 

Bill Ackman wants the Federal Reserve to suspend its battle against inflation fight as the banking crisis remains unresolved. 

In a tweet on Monday, the founder and CEO of hedge fund Pershing Square Capital Management called for the central bank to pause its campaign of interest-rate increases at Wednesday’s much-anticipated meeting. 

“The @federalreserve should pause on Wednesday. We have had a number of major shocks to the system,” Ackman said, referring to the recent implosions of Silicon Valley Bank, Signature Bank, Silvergate Capital and Credit Suisse. 

“This banking crisis remains unresolved and higher rates won’t help,” he said. 

The billionaire investor noted inflation is still a problem and the Fed should continue to show resolve – adding that a temporary pause, or no change to interest rates, is the best option right now. 

US money markets have scaled back bets for another Fed rate increase amid the continuing banking jitters, now mostly anticipating a 25-basis-point increase or even a pause versus a 50-basis-point move expected earlier, according to the FedWatch Tool. Top voices like Elon Musk have also suggested the Fed could start cutting benchmark rates.

The banking turmoil that started with the collapses of Silvergate Capital and Silicon Valley Bank in the US two weeks ago spread to Europe more recently, leading to UBS’s $3.2 billion takeover of Swiss banking giant Credit Suisse. At the same time, regional US banks have come under extreme pressure, with San Francisco-based lender First Republic facing heightened risks of an SVB-like outcome.

“This is not an environment into which the @federalreserve should be raising rates and adding additional pressure on the system as financial stability is the Fed’s first responsibility,” Ackman said.