Bill Ackman, the founder of Pershing Square Capital and a billionaire investor, has expressed his opinion that the US Federal Reserve should pause its policy aimed at stabilizing the domestic banking system and preventing contagion. Meanwhile, Elon Musk, the CEO of Tesla and one of the wealthiest individuals globally, has urged the central bank to reduce interest rates by a minimum of 50 basis points during this week’s FOMC meeting.
Ceasing the Interest Rate Hikes: Urgent Call from Elon Musk and Bill Ackman
Ackman took to Twitter to express why he thinks the Fed should temporarily abandon its strategy of increasing interest rates. He cited recent banking collapses in the US that had an impact on equity and bondholders. Silvergate Capital, Silicon Valley Bank, and Signature Bank had already shut down, while other financial institutions have also faced significant difficulties. For example, shares of San Francisco-based First Republic Bank plummeted over 90% in the past month. Ackman believes that the turbulence remains “unsolved,” and increasing interest rates for the ninth consecutive time could cause more investor losses and a domino effect of bank crashes. He stated that “financial stability is the Fed’s first responsibility,” and in this current environment, the Federal Reserve should not raise rates and add additional pressure to the system.
Ackman acknowledged the existing inflation problem in the US that the Fed needs to address but suggested that the central bank focus on other monetary tools such as “an FDIC deposit guarantee until an updated insurance regime is introduced.”
Musk’s Perspective on the Issue
Elon Musk, the CEO of Twitter, shared his views on the matter in response to Ackman’s tweet. He suggested that the Federal Reserve should reduce interest rates by at least 50 basis points. Many cryptocurrency experts and supporters believe that such a move could be advantageous for digital assets like Bitcoin. A study by BitMEX indicated that it could potentially lead to a market rebound and spark interest in the cryptocurrency sector. Investors may seek exposure to riskier assets to achieve higher returns.
However, it appears improbable that the US Federal Reserve will change its stance this week. The majority of market players anticipate a 25-basis point hike, which would bring the rate to 5%.