Billionaire Investor Bill Ackman: Rate Hikes Are a Mistake in the AI Era

[Financial News]  Billionaire hedge fund investor Bill Ackman, founder and CEO of Pershing Square Capital Management, criticized the Federal Reserve System (Fed)'s interest-rate hikes, saying that central banks' pursuit of monetary tightening in the age of artificial intelligence (AI) is a mistake.
According to Business Insider on the 27th local time, Ackman said in a post on X, "The traditional economic principle that raising the policy rate curbs demand and contains inflation may no longer apply. What if the Fed made the wrong call because models from the past do not fit today's paradigm? It appears that the Fed made a mistake."
The argument is that traditional monetary-policy models no longer work under the new economic paradigm created by the AI revolution. Instead, raising interest rates could further fuel inflation.
In a typical economic cycle, higher interest rates reduce corporate investment and consumer demand. Ackman's analysis, however, is that the situation is entirely different in the AI era.
He explained, "Winning the race for superintelligence offers an effectively infinite return on investment (ROI). That is why demand for computing capacity and energy will not be dampened no matter how high interest rates rise." In other words, major companies will continue to pour money into securing technological leadership, regardless of interest-rate levels.
Ackman also warned that if high interest rates persist over the long term, a vicious cycle could emerge in which higher interest expenses are reflected in the prices of all goods and services, worsening inflation. He noted, "The higher the Fed raises interest rates, the more prices will rise, creating a risk of a vicious cycle in which rates must be raised again."
Ackman's argument sparked heated debate on social media. Some agreed with his view, saying that high interest rates had intensified inflation in areas suffering from supply shortages, such as the housing market.
Others countered that the Fed's monetary-tightening policy in 2022 and 2023 played a decisive role in bringing inflation, which had hovered around 9%, under control. Ackman responded, "The world has changed completely since 2023. We now live in an era racing toward superintelligence following the emergence of ChatGPT."
Ackman is not the only expert to express negative views on the Fed's interest-rate hike policy. Mark Zandi, chief economist at Moody's Analytics, has also warned of the risks of monetary tightening, saying that raising the policy rate could weaken consumer sentiment without resolving international oil-price shocks and other factors that are major causes of inflation.
[email protected] Yoon Jae-jun Reporter