The U.S. economic system is teetering getting ready to a critical downturn if the Federal Reserve would not pump the brakes on its fee hikes, billionaire CEO Barry Sternlicht stated.
The central financial institution has already raised rates of interest 4 instances this yr 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 have been anticipating.
Nevertheless, 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 advised 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 stated. Provide chain points are being resolved, and inventories are actually backing up in warehouses, which is able to result in big discounting, he stated.
“The CPI, the information they’re is previous information. All they should do is name Doug McMillon at Walmart, name any of the true property fellas and ask what is occurring to our condo rents,” he stated, mentioning that the speed of lease development is now slowing.
The continuation of fee hikes will 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 mounted mortgage over 6% — up from 3.29% at the beginning of the yr, based on Mortgage News Daily.
Whereas the Fed’s goal is 2%, inflation ought to run at 3% to 4%, Sternlicht stated.
“Inflation that’s pushed by wage development is fabulous. We must always need wages to go up,” he stated.
“You possibly can pay greater rents, you should buy your gear, you may go to the restaurant you probably have excessive wage development.”
As for when the “critical recession” will hit, Sternlicht believes it’s imminent.
“I feel [in the] fourth quarter. I feel proper now,” he stated. “You will see cracks in every single place.”
Correction: Doug McMillon is CEO of Walmart. An earlier model misspelled his title.