Bill Ackman says Fed is likely done hiking interest rates as U.S. economy is starting to slow

By Joseph Adinolfi

Pershing Square Capital Management founder Bill Ackman said he believes the Federal Reserve won't be raising borrowing costs again this year as the central bank's most aggressive campaign of interest-rate hikes since the 1980s is finally causing the U.S. economy to slow.

During an interview with Andrew Ross Sorkin on CNBC's "Squawk Box," Ackman said that the "Fed is probably done. I think the economy is starting to slow."

A recession that was widely seen on Wall Street as inevitable has so far failed to materialize this year. However, economists have warned that the delayed effects of the Fed's rate increases may finally be starting to slow the labor market, while gauges of manufacturing activity have shown signs of weakness. Investors will receive another update on the state of the U.S. labor market on Friday.

Since March 2022, the Fed has raised its target policy rate by more than 5 percentage points. In July, the target reached its highest level in 22 years.

Since the start of 2023, consumer bankruptcy filings, as well as filings for businesses, have picked up. Delinquency rates for consumer loans like credit cards and auto loans have also risen.

Ackman said higher interest rates on loans are starting to be felt as consumers and businesses are finally being forced to refinance with higher costs. "The economy is still solid...it's definitely weakening. Seeing lots of evidence of weakening in the economy," he said.

The Fed left its policy rate on hold following its September meeting, while signaling that it plans to keep interest rates above 5% for longer than investors had previously expected. It is projections were widely blamed for exacerbating a surge in long-dated Treasury yields that rocked stocks in September. The central bank also shared its expectation that it would raise interest rates once more before the end of the year.

The billionaire investor reiterated his expectation that long-dated Treasury yields will likely move higher. During an appearance at CNBC's "Delivering Alpha" conference last week, Ackman said the yield on the 10-year Treasury note could top 5% in the coming weeks. Ackman's firm has made money betting that the yield on the 30-year Treasury bond BX:TMUBMUSD30Y would rise, a bet that he first unveiled in a post on X in early August.

Yields rose sharply over the summer, with the 10-year yield BX:TMUBMUSD10Y rising 75.4 basis points during the third quarter, its biggest quarterly increase since the third quarter of 2022. Bond yields move inversely to prices, according to Dow Jones Market Data.

The yield on the 30-year bond rose 85.6 basis points during the quarter, its biggest quarterly increase since March 2009, Dow Jones data showed.

Ackman also affirmed that he would "absolutely" be interested in taking X, the social-media platform formerly known as Twitter, public following reports about his interest in The Wall Street Journal. On Friday, Ackman received regulatory approval for a new type of special-purpose acquisition company called Pershing Square SPARC Holdings, which would invest in a private company with the intention of taking it public.

-Joseph Adinolfi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-02-23 1035ET

Copyright (c) 2023 Dow Jones & Company, Inc.