Last Updated on September 29, 2022 by Bitfinsider

Citadel’s founder and CEO, Ken Griffin, believes the Federal Reserve still has work to do to reduce inflation despite a series of large rate hikes.

“We should stay on course to reanchor inflation expectations,” Griffin said at CNBC’s Delivering Alpha Investor Summit in New York City on Wednesday.

According to the billionaire investor, there is a psychological component to inflation, and people in the United States should not begin to assume that inflation above 5% is the norm.

“Once you expect it broadly enough, it becomes reality,” Griffin said. “It becomes the table stakes in wage negotiations, for example.” “As a result, it is critical that we do not allow inflation expectations to become unanchored.”

The consumer price index increased 8.3% year on year in August, approaching a 40-year high and exceeding consensus expectations. To combat inflation, the Fed is tightening monetary policy at its most aggressive pace since the 1980s. The central bank raised rates by three-quarters of a percentage point for the third time in a row last week, promising more hikes in the future.

Griffin believes the Fed faces a difficult task in taming inflation while not slowing the economy too much. He predicted a recession next year.

“Everyone enjoys forecasting recessions, and there will be one.” It’s just a matter of when, and frankly, how difficult. Is it possible that we will have a hard landing by the end of ’23?

Despite the market turmoil and challenging macro environment, Citadel is having a stellar year. According to a person familiar with the returns, its multi-strategy flagship fund Wellington gained 3.74% last month, bringing its 2022 performance to 25.75%.

Griffin expressed concern about the Bank of England’s intervention in the bond market, citing the consequences of dwindling investor confidence. The central bank stated that it would purchase long-term government bonds in whatever quantities were required to end the chaos caused by the government’s tax-cutting plans.

“I’m concerned about what the UK’s loss of confidence represents.” It’s the first time in a long time that a major developed market has lost investor confidence,” Griffin said.