December 6, 2022

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Ken Griffin says the Fed hasn't done enough, and should continue on its way to resetting inflation expectations

Ken Griffin says the Fed hasn’t done enough, and should continue on its way to resetting inflation expectations

Ken GriffinCitadel, founder and CEO, believes the Fed has more work to do to bring down inflation even after a series of big interest rate increases.

“We have to continue down the path we’re on to make sure we bring back inflation expectations,” Griffin told CNBC. Introducing Alpha Summit to Investor in New York City Wednesday.

The billionaire investor said there is a psychological component to inflation and people in the US should not start assuming that an inflation rate above 5% is the norm.

“Once you expect it widely enough, it becomes a reality, and it becomes table bets in wage negotiations, for example,” Griffin said. “So it is important not to let inflation expectations become unchecked.”

The CPI rose 8.3% in August on a yearly basis, close to a 40-year high and above expectations. To tame inflation, the Fed is tightening monetary policy at the most aggressive pace since the 1980s. Last week, the central bank raised interest rates by three-quarters of a percentage point For the third time in a row, pledging more hikes to come.

Griffin said he believes the Fed has a tough job in taming inflation while not slowing the economy too much. He said there may be a chance of a recession next year.

“Everyone likes to predict that there will be a recession, and there will be a recession,” Griffin said. “It’s just a question of when and, frankly, how hard it will be. Are we likely to have a hard landing at the end of ’23? Sure.”

Citadel is having a great year despite the market turmoil and a challenging macro environment. Wellington’s flagship multi-strategy fund rose 3.74% last month, bringing its 2022 performance to 25.75%, according to a person familiar with the returns.

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Regarding the Bank of England’s intervention in the bond market, Griffin said he is concerned about the implications of waning investor confidence. The central bank said You will buy long-term government bonds in any quantity Necessary to end the chaos caused by the government’s plans to cut taxes.

“I am concerned about what the loss of confidence represents in the UK. It represents the first time we have seen a major developed market, in a very long time, lose investor confidence,” Griffin said.