Connect with us

Hi, what are you looking for?

Jewish Business News


Bill Ackman Calls For Fed Rate Hike to ‘Restore Credibility’

Bill Ackman thinks interest rates are too low.

Bill Ackman

Bill Ackman Facebook

Billionaire investor Bill Ackman wants the U.S. Federal Reserve to raise interest rates. Ackman, the head of Pershing Square Capital, said that doing so would help to restore the Fed’s credibility.

Bill Ackman is not the only one to have a problem with the Fed’s low rates. It started when George W. Bush took office and there was a recession. The Fed lowered rates to help. But the low rates also helped to feed into the overheated housing market which in turn led to the 2008 sub-prime mortgage debacle that caused the Great Recession.

And for a long time after that rates needed to be kept low because of the recession as the economy desperately needed the cheap money to keep going. A rate hike could have been deadly not just for America, but for economies around the world.

Please help us out :
Will you offer us a hand? Every gift, regardless of size, fuels our future.
Your critical contribution enables us to maintain our independence from shareholders or wealthy owners, allowing us to keep up reporting without bias. It means we can continue to make Jewish Business News available to everyone.
You can support us for as little as $1 via PayPal at
Thank you.

But why would Bill Ackman want higher rates? After all, low rates mean that it’s cheaper to borrow money so that businesses can grow and expand. This in turn means that their stocks will go up and activist investors like Bill Ackman surely want that to happen.

And a rate hike would make bonds more attractive to investors who would sell stocks to have the money to buy bonds which are a safer investment. This is why the bond markets and stock markets are negatively correlated – if one goes up then the other goes down.

So what exactly is Bill Ackman afraid of? Well, inflation for one thing. Low interest means more cash out there which in turn causes inflation. At the height of the Great Recesiion inflation was actually necessary to avoid deflation, like what happened during the Great depression. Deflation means plummeting pries, leading to losses, which leads to companies firing people or failing, which leads to a worse recession. Inflationary practices by the government, it is believed, offset this.

But this cannot be sustained permanently.

Bill Ackman tweeted, “While it has become conventional wisdom that the @federalreserve will raise rates 3 to 4 times this year to mitigate inflation, the market expects 25 bp (Basis Point) increments. The unresolved elephant in the room is the loss of the Fed’s perceived credibility as an inflation fighter and whether 3 to 4 [raises] would therefore be enough.”

He went on to say that the Federal Reserve could work to restore its credibility with an initial 50 basis points (a basis point is 1/100 of one percent or 0.0001) surprise move to “shock and awe the market.”

Bill Ackman said that this would demonstrate its resolve on inflation. “The Fed is losing the inflation battle,” he said, “and is behind where it needs to be, with painful economic consequences for the most vulnerable. A 50 BP initial move would have the reflexive effect of reducing inflation expectations, which would moderate the need for more aggressive and economically painful steps in the future. Just a thought.”

Other problems stemming from low rates include a low Dollar. While this may make American exports more attractive, it also makes imports more expensive and reduces foreign investment in the U.S.



You May Also Like

World News

In the 15th Nov 2015 edition of Israel’s good news, the highlights include:   ·         A new Israeli treatment brings hope to relapsed leukemia...


The Movie The Professional is what made Natalie Portman a Lolita.


After two decades without a rating system in Israel, at the end of 2012 an international tender for hotel rating was published.  Invited to place bids...

VC, Investments

You may not become a millionaire, but there is a lot to learn from George Soros.