Top 5 voices on US Federal Reserve rate hikes and its impact

Larry Summers, former treasury secretary of the state, recently tweeted, “If the @federalreserve does what’s necessary to contain inflation, I think a slowdown is likely to come. The odds on that happening sometime in the next 12 months I think are pretty good, perhaps 70 percent.” He emphasized the challenge faced by the Fed in managing inflation and growth simultaneously in his most recent conversation with Bloomberg.

Elon Musk, Founder and CEO of SpaceX, tweeted in response to Larry Summers that “Fed data has too much latency. A mild recession is already here. It’s not like just the canary in the coal mine (SVB) died, one of the staunchest miners (Credit Suisse) died too & the cemetery is filling up fast! Further rate hikes will trigger a severe recession. Mark my words.”

Ray Dalio, billionaire investor and founder of Bridgewater Associates, recently projected “a 20 percent decline in stocks and a major recession in the US economy due to the aggressive rate hike campaign of the Fed”, in his recent LinkedIn post. He also projected a range of 4.5 percent to 6 percent for the US federal funds rate over the longer duration as the Fed focuses on stemming inflation and bringing price stability.

Prominent economist Mohamed El-Erian, in a recent interview, compared the Fed’s monetary policy to driving in fog at maximum speed and then suddenly slamming on the brakes. “Do we expect accidents when someone drives like that? Yes. And we do, we’ve gotten financial accidents. To me, this doesn’t come as a surprise at all,” he said. “The hope is we don't get a big economic accident.”

Whereas billionaire investor David Rubenstein said in a recent conversation with CNBC, “I think J Powell's done a pretty good job,” pointing to the Fed’s review of economic data when making policy decisions and Powell’s transparency with markets. Unlike previous central bank chiefs, Powell doesn’t communicate in “Fed speak,” Rubenstein said, as his comments are generally jargon-free and can be easily understood by the general public. “He tells you pretty much what he’s going to do, and then he explains it afterwards. The Fed used to not do that.”

Hence, the focus of investors is now going to shift towards the Fed’s policy decision on the most recent rate hike and the commentary of Fed Chairman Jerome Powell on the way forward for the US economy.