Bill Ackman: The Fed will start cutting interest rates sooner than markets expect

Billionaire investor Bill Ackman claims that the Fed will begin cutting interest rates sooner than the markets anticipate.

The founder of Pershing Square Capital Management stated that such a move could occur in the first quarter. According to swap market data, investors have fully priced in a rate cut for June, while the probability of a rate cut in May is priced at around 80 percent.

The Fed began aggressively raising interest rates in March 2022, leading to the fastest rate hikes in the last 40 years. Although U.S. inflation has generally slowed this year, the central bank has not yet moved to cut rates.

Ackman stated, "What is happening is that the real interest rate affecting the economy continues to rise as inflation falls. If the Fed keeps rates in the roughly 5.5 percent range while inflation is trending below 3 percent, that is a very high real interest rate."

Ackman told Rubenstein that he is not convinced the U.S. economy is heading toward a scenario known as a soft landing, where the Fed raises interest rates without triggering a recession. Noting that he sees evidence that the economy is weakening, Ackman said, "I think there is a risk of a hard landing if the Fed doesn't start cutting interest rates very soon."