Billionaire Investor Warns U.S. Economy Could Face 'Serious Problems' If Fed Doesn't Hike Rates Within the Year

Investor Sam Zell voiced disapproval of the Fed's decision to raise interest rates by 50-basis points, saying the economy could be in trouble if they don't hike rates up to 100.

learn more about Madeline Garfinkle

By Madeline Garfinkle • May 6, 2022

Following the Fed's move to raise interest rates by 50-basis points at the Federal Open Market Committee meeting on Wednesday, Equity Group Investments chairman and founder Sam Zell voiced cautious disapproval.

"The Fed has missed the opportunity to be the disciplinarian that it should be. We have to dramatically reduce the liquidity available in the market," Zell said on Mornings with Maria.

While the Fed's move marks the biggest in two decades, Zell argues it's not enough to reduce inflation in the near future, and warned that the U.S. economy could face "serious problems" if they don't hike rates to 100-basis points within the year.

Zell stated that it comes down to reducing liquidity, and that the Fed needs to "stop sloshing around all that extra capital."

Related: The Fed's 'Do Nothing' Strategy Proves Costly

However, Federal Reserve chairman Jerome Powell disagrees, and shut down the prospect of a 75-basis point raise during a press conference on Wednesday, saying the increase is "not something the committee is actively considering."

Powell argues that inflation is too high and the labor market is too tight, and stands by the decision to raise policy rates by half a percentage point. Powell also remarked that the economy is strong and "not close to or vulnerable to a recession."

Still, Zell doesn't buy it. He warns that the Fed's decision won't effectively slow inflation and that the 100-basis point raise wouldn't trigger a recession but rather would be "likely to bring us back to where we should be."

Related: 4 Ways to Protect Your Business From Inflation

Madeline Garfinkle

Entrepreneur Staff

Editorial Assistant

Madeline Garfinkle is an Editorial Assistant at Entrepreneur.com. She is a graduate from Syracuse University, and received an MFA from Columbia University. 

Related Topics

Editor's Pick

Have More Responsibilities at Work, But No Pay Bump? Use This Script to Get the Raise You Deserve.
Black and Asian Founders Face Opposition at All Levels — Here's Why That Has to Change
Business News

Frontier Airlines Just Announced Its All-You-Can-Fly Summer Pass for $399. What's the Catch?

As travel begins to pick up, the airline hopes unlimited travel will jumpstart its business.

Making a Change

5 Principles for Dealing With Constant Change

Build competencies for adaptability into your company or risk losing your way in an ever-fluid marketplace.

Marketing

What Millennials Really Think About Product Life Cycle, As Told By A Millennial.

Millennials have come into significant purchasing power, and I know how you can capitalize on that.

Business Ideas

55 Small Business Ideas To Start Right Now

To start one of these home-based businesses, you don't need a lot of funding -- just energy, passion and the drive to succeed.

Money & Finance

How NFTs Work — and How They Could Prove Profitable for Your Business

NFTs seem to be all the rage these days, but can they actually work for most businesses?