““They are going to cause unbelievable calamities if they keep up their action, and not just here, all over the globe,” ”
— Barry Sternlicht, CEO, Starwood Capital Group
Billionaire Barry Sternlicht, the chief executive officer and chairman of property investor Starwood Capital Group, has jumped aboard the bandwagon of people calling on the Federal Reserve to ease off its aggressive interest-rate hikes before something, somewhere, breaks.
Speaking Tuesday during an interview with CNBC’s “Squawk Box,” Sternlicht said the Fed should pause to assess how its interest-rate hikes are impacting the economy, and that Federal Reserve Chairman Jerome Powell has already done “enough” to curb inflation.
The billionaire private-equity and real-estate investor said Fed may be misunderstanding the factors underpinning the global inflationary wave that saw consumer-price growth accelerate to its fastest level in more than 40 years.
While others have focused on rising prices of crude oil and other commodities, Sternlicht blamed the massive fiscal stimulus packages approved by Congress and Presidents Donald Trump and Joe Biden.
“Now that we’re building momentum and people are getting employed and wages are rising, they want to stomp on the whole thing and end the party,” he said.
Sternlicht also cautioned the Fed to take a pause and assess how interest-rate hikes are impacting the real economy. Typically, higher rates take longer to feed through to the underlying economy, while the impact on stock and bond markets can be felt almost immediately, he said.
“You’re going to see the roll over of the economy. They’re going to have to lower rates because the economy will crumble. Who would run a business like this?”
Sternlicht is hardly the first CNBC guest to complain about the aggressive tightening of monetary policy seen this year. The Fed has already delivered three 75 basis-point interest rate hikes this year, and Fed funds futures markets are pricing in a more than 60% chance of a fourth after the central bank’s November meeting.
Late last month, Wharton professor Jeremy Siegel accused the Fed of making one of the biggest policy mistakes in its 110-year history by waiting too long to tackle inflation.
And now, Siegel said, the Fed is aiming to make working people pay for its error in judgment.
Hopes that the Fed could be headed for a “pivot” toward less-aggressive rate hikes have helped U.S. stocks surge since the start of October, with the Dow Jones Industrial Average
on track for its biggest back-to-back gains in more than two-and-a-half years.