Billionaire Investor Warns U.S. Economy Could Face 'Serious Problems' If Fed Doesn't Hike Rates Within the Year

(Entrepreneur) - Following the Fed’s move to raise interest rates by 50-basis points at the Federal Open Market Committee meeting on Wednesday, Equity Group Investments chairman and founder Sam Zell voiced cautious disapproval.

"The Fed has missed the opportunity to be the disciplinarian that it should be. We have to dramatically reduce the liquidity available in the market," Zell said on Mornings with Maria.

While the Fed's move marks the biggest in two decades, Zell argues it’s not enough to reduce inflation in the near future, and warned that the U.S. economy could face “serious problems” if they don’t hike rates to 100-basis points within the year.

Zell stated that it comes down to reducing liquidity, and that the Fed needs to "stop sloshing around all that extra capital."

However, Federal Reserve chairman Jerome Powell disagrees, and shut down the prospect of a 75-basis point raise during a press conference on Wednesday, saying the increase is “not something the committee is actively considering.”

Powell argues that inflation is too high and the labor market is too tight, and stands by the decision to raise policy rates by half a percentage point. Powell also remarked that the economy is strong and “not close to or vulnerable to a recession.”

Still, Zell doesn’t buy it. He warns that the Fed’s decision won’t effectively slow inflation and that the 100-basis point raise wouldn’t trigger a recession but rather would be “likely to bring us back to where we should be."


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