The Fed is 'attacking the economy with a sledge hammer' and more interest rate hikes will cause a recession and housing crash, billionaire investor Barry Sternlicht says

• Billionaire investor Barry Sternlicht says the Fed is "attacking the economy with a sledge hammer."
• Outsized interest rate hikes from the Fed are sure to send the economy into a recession, according to the Capital Group's chairman and CEO.
• "If the Fed keeps this up they are going to have a serious recession and people will lose their jobs," Sternlicht said.

Billionaire real estate investor Barry Sternlicht thinks the Fed needs to slow down its interest rate hike trajectory as the economy shows signs of pressing hard on the brakes.

"If the Fed keeps this up, they are going to have a serious recession and people will lose their jobs," he told CNBC in an interview on Thursday.

Sternlicht said he believes that an economic recession could be imminent, potentially arriving in the fourth quarter if it hasn't already arrived. "You are going to see cracks everywhere."

Specifically, he sees a lot of weakness forming in the housing market as mortgage rates soar to their highest levels since 2008. A continuation of interest rate hikes from the Fed, which often quickly flows into higher mortgage rates, will likely cause a "major crash" in the housing market, according to Sternlicht, who added that home prices are already beginning to decline.

Also not helping his view on the broader economy is depressed consumer sentiment and "miserable" CEO confidence.

The Fed "is attacking the economy with a sledge hammer [when] they don't need to," Sternlicht said. Following August's hot CPI inflation report, the Fed is largely expected to raise interest rates by 75 basis points at its policy meeting next week. That rate hike will likely be followed by at least 100 basis points in further increases before year-end, according to market futures data.

But these rate hikes are mostly driven by lagging data, which means the Fed runs the serious risk of over tightening financial conditions just when the economy needs some relief, Sternlicht warned.

"The data they [Fed] are looking at is old data. All they have to do is call Doug McMillon at Walmart, call any of the real estate fellas and ask what is happening to our apartment rents," he said, adding that rental price growth is beginning to slow.

Sternlicht isn't alone in thinking that continued Fed rate hikes will cause grief for asset prices. Billionaire hedge fund manager Ray Dalio said a recession is likely as the Fed is on course to raise the fed funds rate to above 4%. Dalio said both a recession and 20% stock market crash are likely if the Fed continues to hike rates.