Steve Cohen, the hedge fund billionaire who owns the New York Mets, said Wednesday that the Federal Reserve faces a difficult path to bringing inflation down to its 2% target.
“The Fed thinks inflation will eventually settle down to 2%. … I think that’s a tough call,” Cohen said. CNBC’s “Squawk Box.”
The founder and CEO of Point72 Asset Management cited “underemployment” in the U.S. as a reason for inflation to remain stubbornly high, saying that if economic growth remains strong, there will be a shortage of workers. They argued that this could lead to upward pressure on inflation.
He added: “If you grow too fast, labor starts to become constrained, wages rise, and that can become a problem.” “We’re now in one of those problems where I don’t think many people know exactly what’s going to happen.”
Cohen said he was skeptical that inflation would reach 2%, which the U.S. economy hasn’t seen in more than a decade, but added, “I think inflation is somewhat under control.”
“I think ultimately it comes down to whether or not that’s a true statement,” Cohen, who is also chairman and CEO of the New York Mets, told CNBC.
Representatives for Point72 declined The Post’s request for comment.
U.S. inflation rose a sharper-than-expected 3.2% in February, according to the latest Consumer Price Index, which tracks changes in the cost of everyday goods and services.
Moreover, the yearly increase in consumer prices means that the CPI measure has yet to decline on an annual basis since President Joe Biden’s term began in January 2021.
The closest the economy came to negative annual growth since President Biden took office was in July 2022, and inflation remains “steady” at a very high 8.5%.
On a monthly basis, prices rose 0.4% in February, primarily driven by housing and gasoline indexes, which contributed more than 60% of the increase, the Bureau of Labor Statistics reported.
Despite remaining high, February’s CPI represented a significant deceleration from inflation’s stunning 9.1% peak in June 2022, prompting Fed officials to launch a rate hike campaign. In 2022 and 2023, the benchmark federal funds rate was raised 11 times to reach the target level. The current 22-year high is between 5.25% and 5.5% in July 2023.
CPI statistics for March will be released on April 10th.
Wall Street is widely hoping for numbers showing slower month-on-month inflation to encourage central bankers to move ahead with the first of three rate cuts expected this year.
Separately on Wednesday, Federal Reserve Chairman Jerome Powell reiterated that the U.S. central bank has time to ponder its first interest rate cut, given the strength of the economy and recent high inflation rates.
“Recent measurements of both job growth and inflation have been better than expected,” Powell said in a speech at the Stanford Graduate School of Business.
“However, recent data does not significantly change the picture, with continued solid growth, a strong but rebalancing labor market, and inflation heading down towards 2%, albeit on a bumpy road at times. The situation continues.”
“Given the strength of the economy to date and the evolution of inflation, we have time to use emerging data to guide policy decisions,” Powell said, adding that decisions would be made “on a meeting-by-meeting basis.” Ta.
Powell said he and his Fed colleagues generally agree that lowering rates would be appropriate “at some point this year,” “if the economy broadly develops as we expect.” Stated.
But that will only happen if policymakers are “more confident that inflation is falling sustainably” towards the central bank’s 2% target, Powell said. This is also a reiteration of language the Fed has adopted recently to reflect its efforts to balance the risk of lower interest rates.Before inflation is truly under control, interest rates risk suppressing economic activity more than necessary. .
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