• CEO of Starwood Capital Group calls for no further rate hikes
• Starlight: Further rate hikes will lead to the collapse of the economy
• Criticism of Fed timing
In the past few weeks, several experts have sharply criticized the monetary policy of the US Federal Reserve. With Barry Sternlicht, Chairman and CEO of Starwood Capital Group, another billionaire investor has now joined this illustrious circle. As Sternlicht said on “CNBC” in early October with a view to possible further interest rate hikes, the US central bankers would “do incredible harm if they continue, and not just here, but around the world”. He compared Fed Chair Powell to the captain who “steers the Titanic into the ocean.”
Sternlicht: Fed doesn’t understand inflation factors
As the billionaire said on CNBC’s Squawk Box, there is a misunderstanding in the Fed about what triggered the global rise in inflation rates. This is not due to the rising prices of oil and other raw materials, but to the huge stimulus packages that the US government has launched in connection with the corona pandemic. This initially “overstimulated” consumers, but now the aid packages are having exactly the desired effect – which the Fed apparently does not like. “Now that we’re gaining momentum, people are being hired and wages are going up, they want to stomp on the whole thing and end the party,” Sternlicht said. In doing so, they had previously looked on idly at the meme stocks and casino-like conditions on the stock market.
Sternlicht therefore called on the Fed to end its aggressive rate hikes. With the tightening of monetary policy so far, the US Federal Reserve has already done enough to fight inflation, and consumers will limit their consumption anyway when the money from the stimulus is used up. According to the investor, data on the housing market and car sales are already showing a corresponding development. He also pointed out that the Fed had already wiped out $36 billion in the stock market as part of its fight against inflation and, along with other experts, criticized the “backward-looking data” used by the Fed. Now it is time for the Fed to take a break and see how the previous rate hikes would affect the real economy. Because while higher interest rates are reflected directly on the stock and bond markets, the effects on the economy can only be seen after some time. “Across the economy, it will become apparent to everyone that the Fed has done enough,” the CEO of Starwood Capital Group told CNBC.
Gloomy future forecast with further rate hikes
However, if the US Federal Reserve does not pause its tightening of monetary policy, but instead decides to take another major interest rate step at the next meeting in early November, Barry Sternlicht sees the entire global economy at great risk. If the Fed tightens further, companies would initially delay hiring and investment decisions, capital spending would slow and tech stocks would continue to struggle, the investor said. He already sees a lack of IPOs and capital increases, which is likely to increase. In addition, the interest rate hike has already given the US dollar a significant boost, disrupting the global currency markets as other currencies depreciate against the US dollar. According to Sternlicht, this could ultimately shake the entire world trade. You will “see a tipping over of the economy,” said the investor. And ultimately that will mean that the currency watchdogs “have to lower interest rates because the economy will collapse”.
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