Financial guru Bill Ackman predicts the Fed could cut interest rates more than expected in 2024

The billionaire hedge fund manager Bill Ackmann predicted that the Federal Reserve could cut interest rates more than three times this year, and that it should start very soon. The investor said he expects the central bank to have to cut Benchmark borrowing costs early and often in 2024contrary to market expectations of a much more flexible monetary policy this year.

It should be remembered that the Fed kept interest rates stable at its last meeting in December, so Ackmann indicated that multiple cuts are coming this year, but he didn’t say when that would be. Economists are divided over how soon policymakers will make the decision to cut rates.

‘Right now, with inflation cooling significantly, the real cost of money is very high. So I think they’re going to have to move early,’ Ackman, CEO of hedge fund Pershing Square, said during an interview on CNBC’s Squawk Box on Friday.

‘We could certainly make more than three cuts.’ He added: ‘I think it’s good for stocks as long as they lower rates fast enough to avoid a significant recession.‘.

Federal Reserve: projections on future cuts

If they lower them too slowly and the United States enters a recession, would affect stock prices. That’s bad news for 401(K) accounts, which are largely invested in stocks and stock indices such as the Dow or the S&P 500. Interest rates currently range between 5.25% and 5.5%, taking borrowing costs to a 22-year high.

After the December meeting, Fed officials indicated they could carry out three quarter-percentage point rate cuts in 2024, bringing interest rates around 4.6% by the end of the year. But there is disagreement among economists about when these cuts could begin and how many they could be.

Even though the annual inflation rate rose slightly above economists’ predictions to 3.4% in December, markets are still pricing in aggressive rate cuts that begin soon. Traders in the federal funds futures market are predicting there will be as many as six rate cuts this year.

The investment bank said that although inflation is closer to the Fed’s 2% target, The headline annual rate has not followed a consistent downward path. December’s consumer price index was boosted by housing costs, which drove more than half of the month-over-month growth.

Economists had predicted that the annual inflation rate through December would be 3.2%. “The CPI report suggests the Fed’s initial rate cut could be later than the market expects,” said Quincy Krosby, chief global strategist at LPL Financial, following Thursday’s announcement from the Bureau of Labor Statistics.