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Elon Musk said that a severe recession is coming if the Fed continues to raise interest rates.
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The tech billionaire pointed to the pile of dead banks as a sign of economic stress.
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Musk has criticized the Fed more than 20 times in the past seven months for being too hawkish.
Elon Musk has said the graveyard of dead banks proves that raising Fed interest rates will lead to a severe recession, claiming that data from his companies means he has more real-time insight into the economy than anyone else.
in tweet On Sunday, the tech billionaire heeded the economic forecasts of former US Treasury Secretary Larry Summers, who predicted that the US has a 70% chance of slipping into recession within the next year.
“There is already a mild recession here,” Musk replied. “More rate hikes will lead to a severe recession. Mark my word.”
In particular, Musk referred to the turmoil that shook the banking sector, the last failure of which was First Republic Bank. It marks the latest bankruptcy since the collapse of Silicon Valley Bank in March, which suffered from bank runs after high interest rates hit the bank’s bond portfolio.
“It’s not as if the canary in the coal mine (SVB) has died, one of the most powerful miners has died too (Credit Suisse) and the graveyards are filling up fast!” Musk said, explaining that bank failures indicate significant pressure on the economy resulting from the Fed’s interest rate hike.
The Fed raised interest rates by 475 basis points over the past year to tame inflation, a move that could tip the economy further into recession, experts warn.
For his part, Musk has criticized the Fed’s interest rate increases more than 20 times in the past seven months. That’s because inflation is lower than what appears in the Fed’s data, he said, claiming that his policy moves over the past year were “foolish” and responsible for Tesla’s $600 billion market decline in 2022.
He also said that Musk’s group of companies gives him more insight into the state of the US economy.
“Between Tesla, Starlink, and Twitter, I may have more real-time global economic data in one header than I ever have before,” he added. tweet.
Meanwhile, some strategists have argued that inflation remains a major concern, meaning the Fed cannot cut interest rates anytime soon.
Markets are now pricing in an 89% chance that the central bank will raise interest rates another 25 basis points on Wednesday, according to CME FedWatch, which would raise the federal funds rate to 5%-5.25%.
Read the original article on Business Insider