Billionaire investor Bill Ackman says the Fed's fight against inflation may never end due to strikes and soaring gas prices
- The Federal Reserve might never win its war on soaring prices, says Bill Ackman.
- "The long-term inflation rate is not going back to 2%," the billionaire investor said Thursday.
The Fed's battle to drag inflation down to its 2% target level might never end due to workers' strikes, rising energy prices, and several other factors, Bill Ackman warned.
The Pershing Square Capital Management boss said Thursday there's likely further frustration to come for the central bank, which over the past 18 months has hiked interest rates from near-zero to about 5.5% in a bid to tame inflation.
"The long-term inflation rate is not going back to 2% no matter how many times [Fed chair Jerome] Powell reiterates it as his target," Ackman posted on X. "It was arbitrarily set at 2% after the financial crisis in a world very different from the one we live in now."
Inflation, as measured by the Consumer Price Index, has risen for two months in a row after cooling over the first half of the year. Economists worry that the United Auto Workers' union strike and a recent steady rise in gas prices could push inflation even higher.
That's fueled investors' fears the Fed will need to impose further rate hikes – or at least hold borrowing costs at their current level – to hit its 2% target.
"Workers and unions' bargaining power continues to rise," Ackman said. "Strikes abound, with more likely to come as successful walkouts achieve substantial wage gains."
"And higher gas prices will raise inflationary expectations. Just ask your average American," he added. "They see the prices at the pump and in the grocery store and don't believe inflation is moderating."
Ackman also cited firms' inability to outsource production to China, the government's unwillingness to refill the Strategic Petroleum Reserve, and the higher costs associated with the green energy transition as other factors that could drive inflation up.
The billionaire investor reiterated in his posts that he's still short long-term government bonds, after revealing in August that he's betting against 30-year US Treasurys as a buffer against sticky inflation.