Ken Griffin says Fed hasn’t done enough, must continue on course to reset inflation expectations

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Ken Griffin says Fed hasn't done enough, must continue on course to reset inflation expectations
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Ken Griffin, founder and CEO of Citadel, believes the Federal Reserve still has work to do to bring inflation down, even after a series of big rate hikes.

“We need to continue on the path we’ve taken to make sure we re-anchor inflation expectations,” Griffin said at CNBC’s Delivering Alpha Investor Summit in New York on Wednesday.

The billionaire investor said there is a psychological component to inflation and that Americans shouldn’t start assuming inflation above 5% is the norm.

“Once you expect it widely enough, it becomes reality, becomes the table stakes in salary negotiations, for example,” Griffin said. “It is therefore important that we do not allow inflation expectations to become unanchored.”

The consumer price index rose 8.3% in August year-over-year, near a 40-year high and beating consensus expectations. To rein in inflation, the Fed is tightening monetary policy at its most aggressive pace since the 1980s. Last week, the central bank raised rates by three-quarters of a percentage point for the third time in a row, promising to further increases to come.

Griffin said he thinks the Fed has a tough job of getting inflation under control without slowing the economy too much. He said there could be a chance for a recession next year.

“Everyone likes to predict recessions, and there will be one. It’s just a matter of when, and frankly, how bad. Is it possible that at the end of 23 we’ll have a hard landing? Absolutely,” Griffin said.

Citadel is having an exceptional year despite market turbulence and a difficult macroeconomic environment. Its flagship Wellington multi-strategy fund rebounded 3.74% last month, taking its 2022 performance to 25.75%, according to a person familiar with the returns.

Regarding the Bank of England’s intervention in the bond market, Griffin expressed concern about the ramifications of declining investor confidence. The central bank said it would buy long-term government bonds in whatever quantities necessary to end the chaos caused by the government’s plans to cut taxes.

“I worry about what the loss of confidence in the UK represents. This is the first time we’ve seen a large, developed market in a very long time lose investor confidence,” Griffin said.

Why Everyone Is So Obsessed With Inflation

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