The Fed’s interest rate hikes this year are “not sustainable,” Starwood Capital CEO Barry Sternlicht told CNBC this week, saying the series of increases are “self-inflicted suicide.”
“This is a terrible idea, and it’s not necessary. The economy is slowing on its own,” Sternlicht told CNBC’s Squawk Box on Thursday. He said that the impact of the rate increases will be felt in 2023 as companies pull back budgets, which will weigh on stocks. He also discussed the pullback of capital from investments in new infrastructure and equipments.
That “will slow the economy, it cannot do anything other than that,” he told CNBC.
He also opined that the Treasury may have to buy its own assets while the Fed continues to try and pump the brakes on the economy.
“Otherwise, interest rates could get out of hand and you’re going to have inflation and you’re going to go right over the edge because there’s no global growth,” said Sternlicht.
Inflation hit a 40-year high in June increasing 9.1% year-over-year, before slowing to 7.7% in October.
Sternlicht has repeatedly criticized the Fed this year, telling CNBC in September that the central bank was attacking the economy with a sledgehammer and they don’t need to.”
“I think the whole dialogue is wrong. I don’t think we need 2% inflation,” Sternlicht told CNBC in September, adding that he thinks inflation should run between 3 and 4%. “Inflation that’s triggered by wage growth is fabulous. We should want wages to go up. That’ll help social issues in the US – it’s the trickle-down we’ve all been waiting for.”