The US financial system is teetering on the point of a critical downturn if the Federal Reserve does not pump the brakes on its fee hikes, Billionaire CEO Barry Sternlicht mentioned.
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, consumer prices rose 0.1% instead of the 0.1% decline economists surveyed by Dow Jones had been anticipating.
Nevertheless, Sternlicht believes the Fed was late to the sport and is now being too aggressive.
“The financial system is braking laborious,” the chairman and CEO of Starwood Capital Group informed CNBC’s “Squawk Box” on Thursday.
“If the Fed retains this up they’ll have a critical recession and folks will lose their jobs,” he added.
Shopper confidence is horrible and CEO confidence is “depressing,” Sternlicht mentioned. Provide chain points are being resolved, and inventories at the moment are backing up in warehouses, which can result in large discounting, he mentioned.
“The CPI, the info they’re is outdated information. All they must do is name Doug McMillon at Walmart, name any of the actual property fellas and ask what is occurring to our condominium rents,” he mentioned, mentioning that the speed of rent growth is now slowing,
The continuation of fee hikes can even trigger a “main crash” within the housing market, Sternlicht predicted. The once-hot actual property market is swiftly slowing downwith mortgage charges for a 30-year fastened mortgage over 6% — up from 3.29% firstly of the 12 months, in response to Mortgage News Daily,
Whereas the Fed’s goal is 2%, inflation ought to run at 3% to 4%, Sternlicht mentioned.
“Inflation that’s pushed by wage progress is fabulous. We must always need wages to go up,” he mentioned.
“You possibly can pay increased rents, you should buy your tools, you possibly can go to the restaurant in case you have excessive wage progress.”
As for when the “critical recession” will hit, Sternlicht believes it’s imminent.
“I feel [in the] fourth quarter. I feel proper now,” he mentioned. “You’re going to see cracks all over the place.”
Correction: Doug McMillon is CEO of Walmart. An earlier model misspelled his title.