‘The economic system is braking laborious,’ says billionaire Barry Sternlicht
The U.S. economic system is teetering getting ready to a critical downturn if the Federal Reserve does not pump the brakes on its price hikes, billionaire CEO Barry Sternlicht mentioned.
The central financial institution has already raised rates of interest 4 instances this 12 months and is extensively anticipated to hike them by 75 foundation factors subsequent week in an effort to tame inflation. Earlier this week, client costs rose 0.1% as a substitute of the 0.1% decline economists surveyed by Dow Jones had been anticipating.
Nonetheless, Sternlicht believes the Fed was late to the sport and is now being too aggressive.
“The economic system is braking laborious,” the chairman and CEO of Starwood Capital Group instructed CNBC’s “Squawk Field” on Thursday.
“If the Fed retains this up they’re going to have a critical recession and folks will lose their jobs,” he added.
Client confidence is horrible and CEO confidence is “depressing,” Sternlicht mentioned. Provide chain points are being resolved, and inventories at the moment are backing up in warehouses, which can result in big discounting, he mentioned.
“The CPI, the info they’re is previous knowledge. All they need to do is name Doug McMillon at Walmart, name any of the actual property fellas and ask what is occurring to our condo rents,” he mentioned, stating that the speed of lease progress is now slowing.
The continuation of price hikes may even trigger a “main crash” within the housing market, Sternlicht predicted. The once-hot actual property market is swiftly slowing down, with mortgage charges for a 30-year fastened mortgage over 6% — up from 3.29% initially of the 12 months, in line with Mortgage Information Each day.
Whereas the Fed’s goal is 2%, inflation ought to run at 3% to 4%, Sternlicht mentioned.
“Inflation that’s pushed by wage progress is fabulous. We should always need wages to go up,” he mentioned.
“You may pay larger rents, you should purchase your tools, you may go to the restaurant in case you have excessive wage progress.”
As for when the “critical recession” will hit, Sternlicht believes it’s imminent.
“I feel [in the] fourth quarter. I feel proper now,” he mentioned. “You’re going to see cracks in all places.”
Correction: Doug McMillon is CEO of Walmart. An earlier model misspelled his identify.