Monday, January 30

Elon Musk says the Fed must cut rates ‘immediately’ to stop a severe recession

Elon Musk believes a recession is on the way and is concerned that the Federal Reserve’s efforts to reduce inflation would exacerbate the situation.

In a tweet early Wednesday, the Tesla CEO and Twitter owner called on the Fed “to cut interest rates immediately” or risk “amplifying the probability of a severe recession.”

The remarks happened during a discussion with Tesmanian co-founder Vincent Yu, in which several others took part.

Later in the thread, NorthmanTrader founder Sven Henrich observes that the Fed “stayed too easy for too long totally misreading inflation and now they’ve tightened aggressively into the highest debt construct ever without accounting for the lag effects of these rate hikes risking they’ll be again late to realize the damage done.”

This isn’t the first time Musk has predicted coming economic disaster.

On Oct. 24, the world’s richest man predicted a global recession would endure “until the spring of ’24,” but he admitted he was “just speculating.” Other business executives, like Amazon CEO Jeff Bezos, JPMorgan CEO Jamie Dimon, and Goldman Sachs CEO David Solomon, have issued similar economic forecasts.

The Fed appears to be nearing the end of a rate-hiking campaign geared at combating inflation, which is still near its 40-year peak. The central bank has raised its benchmark rate six times this year, bringing the overnight borrowing rate to a target range of 3.75%-4%, and is anticipated to raise it a few more times before calling it quits.

Fed officials have recently stated that they foresee lesser hikes in the future than the four consecutive 0.75 percentage point increases, the most recent of which occurred in early November. Fed Chairman Jerome Powell will address the public in a speech at the Brookings Institution on Wednesday afternoon.

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