Home Economy Elon Musk says the Fed must cut rates ‘immediately’ to stop a severe recession

Elon Musk says the Fed must cut rates ‘immediately’ to stop a severe recession

by Shraddha Sharma

Tesla Motors CEO Elon Musk unveils a new all-wheel-drive version of the Model S car in Hawthorne, California October 9, 2014.

Lucy Nicholson | Reuters

Elon Musk thinks a recession is coming and worries the Federal Reserve’s attempts to bring down inflation could make it worse.

In a tweet early Wednesday, the Tesla CEO and Twitter owner called on the Fed “to cut interest rates immediately” or risk “amplifying the probability of a severe recession.”

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The remarks came in an exchange with Tesmanian co-founder Vincent Yu in which several others participated.

Later in the thread, NorthmanTrader founder Sven Henrich observes that the Fed “stayed too easy for too long totally misreading inflation and now they’ve tightened aggressively into the highest debt construct ever without accounting for the lag effects of these rate hikes risking they’ll be again late to realize the damage done.”

Musk replied, “Exactly.”

This isn’t the first time Musk has warned of impending economic doom.

In a similar exchange on Oct. 24, the world’s richest man estimated a global recession could last “until the spring ’24,” though he noted he was “just guessing.” That prediction came amid a slew of economic warnings from other business executives including Amazon CEO Jeff Bezos, JPMorgan CEO Jamie Dimon and Goldman Sachs CEO David Solomon.

A recession is inevitable if the Fed maintains restrictive policy, says Wharton's Jeremy Siegel

The Fed appears to be entering the late stages of a rate-hiking campaign aimed at tackling inflation still running near its highest level in more than 40 years. The central bank has increased its benchmark rate half a dozen times this year, taking the overnight borrowing rate to a target range of 3.75%-4%, and is expected to hike a few more times before stopping.

In recent days, Fed officials have said they expect smaller increases ahead than the four consecutive 0.75 percentage point increases, the most recent of which came in early November. Fed Chairman Jerome Powell is addressing the public Wednesday afternoon in a speech to be delivered at the Brookings Institution.

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