1664392570 Ken Griffin says Fed hasnt done enough and must continue

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

Citadel's Ken Griffin says the Fed must keep fighting to reset inflation expectations

Ken Griffin, Citadel founder and CEO, believes the Federal Reserve still needs to do more to bring down inflation even after a series of large rate hikes.

“We should continue on the path we have taken to ensure that we re-anchor inflation expectations,” Griffin said Wednesday at CNBC’s Delivering Alpha Investor Summit in New York City.

The billionaire investor said inflation has a psychological component and people in the US should not assume that inflation above 5% is the norm.

“As soon as you expect it to be generic enough, it becomes a reality, like table stakes in wage negotiations,” Griffin said. “It is therefore important that we do not let inflation expectations be torn from their anchors.”

The consumer price index rose 8.3% yoy in August, near a 40-year high, beating consensus expectations. To tame inflation, the Fed is tightening monetary policy at the most aggressive pace since the 1980s. The central bank raised interest rates by three-quarters of a percentage point for the third straight month last week and promised further rate hikes.

Griffin said he believes the Fed has a tough job trying to tame inflation without slowing the economy too much. He said there could be a chance of a recession next year.

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

Citadel has had an excellent year despite the market turmoil and challenging macro environment. Its multi-strategy flagship, Wellington, is up 3.74% over the past month, bringing its performance to 25.75% in 2022, according to a person familiar with returns.

On the Bank of England’s bond market intervention, Griffin said he was concerned about the impact of declining investor confidence. The central bank announced it would buy any amount of long-dated government bonds in a bid to end the chaos caused by the government’s tax cut plans.

“I worry about what the loss of confidence in Britain means. It’s the first time in a very long time that a major developed market has lost investor confidence,” Griffin said.