The U.S. economy is teetering getting ready to a severe downturn if the Federal Reserve does not pump the brakes on its charge hikes, billionaire CEO Barry Sternlicht stated.
The central financial institution has already raised rates of interest 4 occasions this 12 months and is extensively anticipated to hike them by 75 foundation factors subsequent week in an effort to tame inflation. Earlier this week, shopper costs rose 0.1% as an alternative of the 0.1% decline economists surveyed by Dow Jones have been anticipating.
However, Sternlicht believes the Fed was late to the sport and is now being too aggressive.
“The economy is braking hard,” the chairman and CEO of Starwood Capital Group instructed CNBC’s “Squawk Box” on Thursday.
“If the Fed keeps this up they are going to have a serious recession and people will lose their jobs,” he added.
Consumer confidence is horrible and CEO confidence is “miserable,” Sternlicht stated. Supply chain points are being resolved, and inventories at the moment are backing up in warehouses, which is able to result in enormous discounting, he stated.
“The CPI, the data they 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 stated, mentioning that the speed of lease development is now slowing.
The continuation of charge hikes will even trigger a “major crash” within the housing market, Sternlicht predicted. The once-hot actual property market is swiftly slowing down, with mortgage charges for a 30-year fastened mortgage over 6% — up from 3.29% initially of the 12 months, in keeping with Mortgage News Daily.
While the Fed’s goal is 2%, inflation ought to run at 3% to 4%, Sternlicht stated.
“Inflation that is driven by wage growth is fabulous. We should want wages to go up,” he stated.
“You can pay higher rents, you can buy your equipment, you can go to the restaurant if you have high wage growth.”
As for when the “serious recession” will hit, Sternlicht believes it is imminent.
“I think [in the] fourth quarter. I think right now,” he stated. “You are going to see cracks everywhere.”
Correction: Doug McMillon is CEO of Walmart. An earlier model misspelled his title.