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    Home»Real estate»The chances of a recession are “very, very high”, warns this real estate titan, anticipating terminal rates closer to 6%
    Real estate

    The chances of a recession are “very, very high”, warns this real estate titan, anticipating terminal rates closer to 6%

    December 10, 20223 Mins Read
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    Real estate investor Sam Zell, founder of the private investment company Equity Group Investment, recently discussed the possibility of higher than expected rate hikes, while sharing his thoughts on a potential recession.

    What happened: The Fed is desperately trying to make up for being way behind the curve, the billionaire investor said in a recent interview with Fox News.

    “We overdid it with the stimulus,” Zell said, adding that there was $7 trillion in borrowing over a relatively short period. The Fed still has a lot of work to do to get things under control, he said. The billionaire investor added that he wouldn’t make too many assumptions about lower interest rates as he believes it needs to ‘rise and stay put’ for a while if inflation is to be beaten .

    On whether a final federal funds rate of 5% would do the job, Zell said: “I think 5% is probably the minimum needed to slow the pace of inflation and it will probably take something in the above that.”

    When asked if the federal funds rate should be significantly higher than that, Zell replied, “probably closer to six than five.”

    See also: Best Penny Stocks

    The Fed missed the mark and let “super low interest rates” exist too long, the billionaire said. The central bank finally woke up and decided to take liquidity out of the system and raise interest rates, he added.

    “I think it’s in high demand.”

    Zell said the real question is whether the Fed raised it fast enough to slow the process down so we don’t have to go too high to get the results we’re looking for. The Fed is aiming for a reduction in inflationary pressure, which has eased somewhat so far, he said.

    “It is too early to declare victory,” he added.

    High probability of recession: The challenge in front of the Fed Chairman Jerome Powell that’s how much he can adjust rates without screwing up the economy.

    Zell also stated that the chances of a recession are “very, very high“, but it remains to be seen whether the recession is going to be painful or not.

    “But it’s very hard for me to believe that we’re not going into an area with much higher interest rates and a lot of people sitting on the sidelines avoiding making commitments,” he added.

    Read more : Cathie Wood warns ahead of FOMC meeting Fed is making ‘serious’ mistake as yield curve inversion raises red flag

    Photo: Courtesy of Bill Sofa on flickr

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