Fed Needs Half-Point Rate Hike to Regain Credibility: Ackman

Billionaire investor Bill Ackman says the Federal Reserve is losing its battle against inflation and should raise its key interest rate by a bigger-than-expected 50 basis points in March to “restore its credibility.”

“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,” Ackman said in a series of tweets.

Facing pressure from Congress and the public to tackle the hottest inflation since the 1980s, a chorus of officials this month floated raising rates in March and the potential need to hike four and even five times this year, marking a clear shift in outlook from just a few weeks ago.

In December, U.S. central bankers forecast that they will raise rates three times this year and speed up the pace of tapering their asset-purchases to conclude the program in mid-March. The Fed hasn’t raised rates by more than 25 basis points at a time since May 2000.