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Cathie Wood, the CEO and CIO of Ark Invest, claims that the Federal Reserve is causing deflation. The Federal Reserve is engaging in quantitative tightening to combat inflation in the United States. In doing so, the Fed has all but ensured a global stock market crash.
However, Catherine Wood of ARK investments is questioning the Fed’s hawkish stance. In an open letter, she claims that the Fed’s policy guidance will result in deflation. Wood is not the only notable figure with a dire deflation warning. Tesla CEO Elon Musk has made similar comments regarding the central bank’s restrictive monetary policy.
Pressure Mounts On The Fed
The Federal Reserve appears to be resolute in its stance against inflation. Fed chair Jerome Powell highlighted the importance of curbing inflation before it is entrenched into normalcy. He considers bringing inflation under 2% to be the topmost priority. He also warned of impending pain for households and businesses.
However, market participants were not impressed by the central bank’s monetary policy. Experts are blaming the bank for delaying a pivot to quantitative easing, similar to when it delayed a pivot to quantitative tightening. Moreover, the fear of global financial instability is mounting.
The Fed’s hawkish stance has strengthened the US dollar. It has caused havoc in other countries’ economies. The World Bank and the United Nations have issued statements warning central banks of an impending recession. However, a pivot from the US central bank remains unlikely.
Cathie Wood Gives Deflation Warning
Wood is questioning the Fed’s policy guidance. She highlights how the Fed has agreed on four consecutive 75 bps hikes. Moreover, she is alarmed by the unanimity among the Fed officials for quantitative tightening. Dovish and hawkish members have taken an aggressive stance.
She claims that commodity prices are the leading indicators of inflation. She highlights that prices of commodities, except food and energy, are falling on an year-to-year basis. Therefore, she claims that the Fed’s actions are unnecessary and excessive.
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