Bill Ackman Predicts Federal Reserve Rate Cuts Sooner Than Expected

According to Yahoo News, billionaire investor Bill Ackman anticipates that the Federal Reserve will start reducing interest rates earlier than market predictions suggest. Ackman, the founder of Pershing Square Capital Management, believes that rate cuts could occur as early as the first quarter. Currently, traders are fully pricing in a rate cut for June, with an 80% chance of a cut happening in May, based on swaps market data. The Fed began aggressively raising rates in March 2022, resulting in the fastest pace of rate increases in 40 years. However, the central bank has not yet cut rates, even as US inflation has generally slowed this year. Ackman expressed concerns about the real rate of interest continuing to rise as inflation declines, and he believes that if the Fed maintains rates around 5.5% while inflation trends below 3%, it would result in a very high real rate of interest. Ackman also shared his doubts about the US economy achieving a soft landing, a situation where the Fed raises interest rates without causing a recession. He warned of a potential hard landing if the Fed does not begin cutting rates soon, as he has observed signs of a weakening economy.