The Fed’s hoped-for inflation goal of 2% is “no longer credible,” wrote Bill Ackman, founder of Pershing Square Capital Management, in a Twitter thread he posted after Fed Chair Jerome Powell stated that interest rates would keep rising until inflation hits that golden 2%. Instead, the Fed should aim for a 3% target in order to bolster long-term growth, Ackman wrote in the tweets, which were cited in an article in Bloomberg.
De-globalization, the shift to cleaner energy, wage increases, and shorter supply chains are all inflationary, Ackman wrote, and while businesses need stable prices, they “can thrive in a world with 3% stable inflation.” And even Powell admitted, when pressed, that the Fed may need to adjust to a higher rate in the long-term if they couldn’t reach that 2% goal, which Ackman doesn’t believe they will get without “a deep, job-destroying recession,” he wrote, according to Bloomberg. Likewise, even if the Fed did inflation down to that 2% target, it likely wouldn’t stay there long before going right back up. In the long term, “[a]ccepting 3%+/- inflation is a better strategy for a strong economy and job growth,” Ackman maintains.