The U.S. Federal Reserve should lift interest rates by a “full point” this afternoon as it’s still significantly behind the curve, says billionaire investor Sam Zell.
Zell’s remarks on CNBC’s ‘Squawk Box’
According to him, a practical approach for the central bank to regain its lost credibility is to increase rates by 100 basis points. Speaking with CNBC’s Becky Quick on “Squawk Box”, Zell said:
If I were running the Federal Reserve today, I would raise interest rates by a full point. The credibility of the U.S. Fed has been significant damaged. The central bank is supposed to be independent of politics.
Last week, the Bureau of Labour Statistics said U.S. inflation hit a new 40-year high of 8.6% in May. The Dow Jones estimate was for a narrower 8.3% increase instead.
U.S. economy can weather a 200-bps increase
The Founder and Chairman of Equity Group Investments is convinced the U.S. economy is still strong enough to weather up to a 200 basis points increase in interest rates. He noted:
Raising rates by a point from 1.50% to 2.50% is really not that much. There’s enough room in the economy to absorb a couple hundred bps increase. We have overstimulated the economy by a big factor. We have to take the punchbowl away.
The S&P 500 index is in the green ahead of the Fed meeting at 2 p.m. ET. It is, however, down more than 20% versus the start of the year.
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