Bill Ackman – an American billionaire investor and Founder of Pershing Square Capital – thinks the US Federal Reserve should temporarily halt its policy to stabilize the local banking system and prevent contagion.
Tesla’s CEO and one of the world’s richest people – Elon Musk – urged the central bank to drop the interest rates by at least 50 basis points at the FOMC meeting this week.
Ackman took it to Twitter to explain why the Fed should temporarily abandon its interest rate-increasing strategy. He pointed out the recent banking collapses in the US, which affected equity and bondholders.
Aside from the already shut Silvergate Capital, Silicon Valley Bank, and Signature Bank, other financial institutions have also experienced significant difficulties. The San Francisco-based First Republic Bank, which saw its shares plummet by over 90% in the past month, is among the examples.
Ackman believes the turbulence remains “unsolved,” while increasing the interest rates for a ninth consecutive time could cause additional investor losses and a domino effect of crashing banks.
“This is not an environment into which the Federal Reserve should be raising rates and adding additional pressure on the system as financial stability is the Fed’s first responsibility.”
The billionaire acknowledged the inflation rate in the US as an existing problem that the Fed needs to solve. However, the central bank should focus on other monetary tools, such as “an FDIC deposit guarantee until an updated insurance regime is introduced.”
Twitter’s CEO – Elon Musk, responded to Ackman’s tweet, claiming that the Federal Reserve should lower interest rates by at least 50 basis points.
Numerous cryptocurrency proponents and experts believe such a decision could be highly beneficial for digital assets, including bitcoin. A recent research conducted by BitMEX estimated it could propel a market recovery and boost interest in the cryptocurrency industry as investors will likely seek exposure to riskier assets in search of greater returns.
It seems unlikely, though, that the US central bank will pivot this week. Most market participants think it will lift interest rates by 25 basis points, rounding the mark to 5%.