Legendary investor Paul Tudor Jones predicts that the Federal Reserve will not raise interest rates any further this year, putting markets higher by the end of this year.
In a new interview with CNBC, Jones says that declining Consumer Price Index (CPI) data – which measures the changes in the prices of goods and services – and a looming recession will cause the Fed to keep interest rates at their current level.
The Federal Reserve has raised interest rates 10 times since March 2022 in an effort to draw down inflation, putting pressure on risk assets like Bitcoin (BTC).
“I think they are done [hiking]. Definitely, I think they’re done. They could probably declare victory now because if you look at CPI it’s been declining 12 straight months, that’s never happened before in history. So there’s a strong downward arc to inflation at the moment.”
The billionaire also says that the hikes have brought the country to the point where a recession historically has occurred. However, he does not foresee the Fed cutting rates just yet.
“Clearly, they have to be governed by trailing 12-month inflation, but if we get to the here-and-now, you can see that inflation to a great extent has been wrung out of the market. Now, does that mean that we’re getting ready to imminently cut? No.
But you got to think of interest rates a bit like chemotherapy. Chemo is poison. Interest rates with the amount of sector-wide debt that we have between private consumers and the government, we are probably at levels where we’ve typically hit a recession in the past because of the interest tax on the economy. So we’re at a level that historically has really slowed the economy, and historically has kicked off a recession.”
Asked if he would have supported the last Fed rate hike of 0.25 percentage points earlier this month, Jones says he could have been persuaded either way because he believes the stock market will perform strongly through the remainder of 2023 and end higher than where it’s at today.
“I would have been 50/50 on the last one. I could have been talked out of it. I would have been reluctant to do it. The only reason why I probably would maybe have gone along with it is because I think equity prices are going to continue to go up this year and the financial cycle drives so much of the business cycle.”
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