Ken Griffin says US recession inevitable, but backs Fed hikes

Billionaire hedge fund CEO Ken Griffin thinks that a recession is inevitable and that the Federal Reserve hasn’t been aggressive enough in hiking interest rates in order to bring down record levels of inflation.

“We should continue on the path that we’re on to ensure that we reach our inflation expectations,” Griffin told a conference organized by CNBC in New York City on Wednesday.

The CEO of Citadel, the hedge fund which manages some $50 billion in assets, thinks the US will fall into a recession sometime next year.

“Everybody likes to forecast recessions, and there will be one,” Griffin said. “It’s just a question of when, and frankly, how hard.”

Griffin added: “Is it possible end of ’23 we have a hard landing? Absolutely.”

The US has experienced two consecutive quarters of negative GDP growth, which technically meets the definition of a recession.

The economic climate is further dampened by the stubbornly high levels of inflation not seen in the country for four decades.

The Fed has undertaken a hawkish policy of hiking interest rates in hopes of bringing down record levels of inflation.
The Fed has undertaken a hawkish policy of hiking interest rates in hopes of bringing down record levels of inflation.

Earlier this month, the Labor Department released data showing that the Consumer Price Index rose in August by a higher-than-expected 8.3% — this despite falling gasoline prices.

Americans have been paying more for essential goods such as food, health care, housing, and appliances.

The Fed responded by hiking the benchmark interest rate by 0.75 percentage points — which moved the target range to between 3% and 3.25%.

Griffin said that Americans shouldn’t assume that sky-high levels of inflation will become the norm.

“Once you expect it broadly enough, it becomes reality, becomes the table stakes in wage negotiations, for example,” Griffin said.

“So it’s important that we don’t let inflation expectations become unanchored.”

Griffin’s cheerleading for higher interest rate hikes contrasts with comments made by Charles Evans, the president of the Chicago Federal Reserve.

Evans told CNBC’s “Squawk Box Europe” on Tuesday that he was concerned policymakers would hike rates too fast.

“I am a little nervous about exactly that,” Evans said. “There are lags in monetary policy and we’ve moved expeditiously. You’re not leaving much time to look at each monthly release.”