Cathie Wood, the founder of Ark Investment Management and a crypto advocate, has been speaking out about the Federal Reserve’s interest rate changes over the weekend.
Cathie Wood warned the US central bank was “playing with fire” with its anticipated rate adjustments in a series of tweets over the weekend.
The Federal Reserve changed the interest rate last month, raising it from 0.25% to 0.5%. In the larger scheme of things, it won’t make much of a difference to ordinary consumers, who are still dealing with around 8% inflation.
Following a strong jobs report on April 1, the two-year bond yield surpassed the 30-year bond yield for the first time since 2007. Raising interest rates is a “big mistake,” according to the pro-crypto fund manager.
She wrote on the ‘flipping’ of yield curves, saying:
“The 10-year to 3 month yield curve is steep because the Fed is telegraphing aggressive interest rate hikes in the face of inflation that has been stoked by supply shocks. Inflation is a highly aggressive tax that is killing purchasing power and consumer sentiment.”
She went on to say that consumer sentiment in the United States is today lower than it was during the pandemic’s peak. She further stated that it has returned to pre-financial-crisis levels and is not far from its all-time lows in the 1980s, when inflation and interest rates were in double digits.
“The economy succumbed to recession in each of those periods. Europe and China also are in difficult straits. The Fed seems to be playing with fire.”
The Federal Reserve is out of alternatives and must raise interest rates, but a recession appears to be on the horizon at this time.
Goldbug Peter Schiff declared that the Fed has waited too long to raise rates, adding “Yes we are headed to recession, but the Fed should raise rates anyway as inflation will get worse!”