Bill Ackman says Fed’s 2% inflation target ‘no longer credible’

Bill Ackman thinks that the Federal Reserve’s 2% inflation target is “no longer credible” after Fed Chair Jerome Powell reiterated that rate hikes will continue until inflation reaches 2%. The Pershing Square Capital Management founder added that a targeted inflation of around 3% would be a better strategy for long term growth.

“Businesses need price stability, but can thrive in a world with 3% stable inflation,” he wrote in a thread on Twitter.

The @federalreserve 2% inflation target is no longer credible. De-globalization, the transition to alternative energy, the need to pay workers more, lower-risk, shorter supply chains are all inflationary. The Fed cannot change its target now, but will likely do so in the future.

— Bill Ackman (@BillAckman) December 14, 2022

When asked, Powell recommitted to a 2% target, but admitted that examining a higher rate was a possible ‘longer-term project.’ Businesses need price stability, but can thrive in a world with 3% stable inflation.

— Bill Ackman (@BillAckman) December 14, 2022

I don’t think the @federalreserve can get inflation back to 2% without a deep, job-destroying recession. Even if it gets back to 2%, it won’t remain stable there for the long term. Accepting 3%+/- inflation is a better strategy for a strong economy and job growth over the LT.

— Bill Ackman (@BillAckman) December 14, 2022