(Bloomberg) — Kyle Bass, chief investment officer at Hayman Capital, tells CNBC in an interview that while the Fed’s “kneejerk” reaction to Covid was “let’s say necessary,” they are now struggling with how to take the 40% more money they put into circulation back.
Additionally, due to a “decade of bad policy” we are going to see higher food and energy prices at the same time the economy is cooling off. He sees a shallow recession happening at the end of the year or early next year.
Bass believes that the Fed will see the eventual stagflationary situation and will therefore have to cut rates. He doesn’t believe the Fed is going to hike rates much over 200 basis points in this cycle before they need to pause and reverse course.
Pointing to yesterday’s minutes, he notes that Fed staff is still projecting 2.8% growth in 2022 which means growth would need to be at a 4% rate to hit that target after the negative Q1 GDP reading.
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Kyle Bass Tells CNBC He Believes Fed Will Need to Cut in 2023