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Bill Ackman warns US economy is about to ‘fall by train’ after latest Fed rate hike


The US economy may be heading for a “train wreck” after the financial crisis Federal Reserve continued the fight against inflation and Treasury Secretary Janet Yellen ruled out a “comprehensive” protection for bank deposits despite the worst financial crisis in a decade, according to the regulator. hedge fund Bill Ackman.

Ackman, the founder of Pershing Square Capital Management, sounded the alarm on Wednesday about the possibility that deposits out of the bank could accelerate after Yellen pointed out that not all deposits go unnoticed. Insurance will be protected in the event of a bank failure in the future.

“This was a big mistake. We are suffering our own wounds,” he wrote in a tweet. Yellen’s statementcombined with the Fed’s most recent rate hike, “puts even more pressure” on non-systematic banks.

FED Raises INTEREST RATE PER QUARTERLY ANY BANK RECENTLY

His comments came shortly after Fed officials released another statement. increase interest rates by percentage pointsraised the benchmark interest rate to between 4.75% and 5%, the highest level since 2007. It marked the ninth consecutive rate hike aimed at combating high inflation.

Federal Reserve

Pedestrians near the Treasury building in Washington, DC, on December 30, 2022.

That decision was complicated by the stunning collapse of Silicon Valley Bank and two others in early March, because rapidly rising interest rates played a direct role in the bank’s failure. Increasing interest rates risks exacerbating instability in the financial system.

Regulators rushed to stem the fallout from the bank’s collapse, including protecting all deposits at the two institutions – even those holding amounts in excess of the FDIC The Fed also introduced a new emergency assistance measure for lenders to help them meet deposit withdrawals on favorable terms.

The moves are intended to stem the flow of money from small U.S. and regional lenders as customers flock to banks deemed too big to fail. However, smaller banks are still feeling the sting from the industry-wide turmoil.

“When combined with higher debt and deposit costs due to rising interest rates, consider what the impact will be on lending rates and our economy,” Ackman said. “The longer this banking crisis drags on, the greater the damage to smaller banks and their access to low-cost capital.”

Bill Ackman

William Ackman, founder and CEO of hedge fund Pershing Square Capital Management, speaks during the Sohn Investment Conference in New York, on May 4, 2015.

He added: “Trust and confidence are acquired over many years, but can be wiped out in a few days. I’m afraid we’re headed for another train wreck. Hopefully the authorities our management will get this right,” he added.

Fed policymakers said it was too early to say how stress in the banking sector would affect the overall economy.

Chairman Jerome Powell told reporters in a post-meeting news conference: “Financial conditions appear to have tightened and possibly more than traditional indicators indicate. “However, the question for us is how important will that be – how much will it be and how long will it last?

“We’re going to look at the severity of this issue and whether it looks like it’s going to be sustained. And if it is, it could easily have significant macroeconomic impacts and we I will include that in my policy decisions.”

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