Billionaire Bill Ackman says there is a “real risk” that the economy will suffer a hard landing if the Fed doesn’t cut interest rates soon

Bill Ackman, CEO of Pershing Square Capital. Jeenah Moon/Bloomberg via Getty Images

Billionaire investor Bill Ackman is betting that the Federal Reserve will start cutting interest rates sooner than markets predict.

The founder of Pershing Square Capital Management said such a move could come as early as the first quarter. Traders are fully expecting a rate cut in June, with the chance of a rate cut in May hovering around 80%, according to swap market data.

The Fed began aggressive interest rate hikes in March 2022. This resulted in the fastest tariff increases in 40 years. The central bank has not yet cut interest rates even though inflation in the U.S. has largely slowed this year.

“What’s happening is that the real interest rate, which affects the economy, continues to rise while inflation is falling,” Ackman said in an upcoming episode of The David Rubenstein Show: Peer-to-Peer Conversations.

Ackman said that if the Fed keeps interest rates at about 5.5% while inflation is below 3%, “that’s a very high real interest rate.”

Ackman, 57, founded Pershing Square in 2004. The company, which manages about $17 billion in assets, made a name for itself through shareholder activism, but Ackman said he prefers to think of his team as “committed owners” of companies , instead of being tough company activists.

The company has made a number of macro bets over the years. Last month, Ackman moved the market when he tweeted that the firm had shorted U.S. Treasury bonds.

Ackman told Rubenstein he was not convinced the U.S. economy was headed for a so-called soft landing, a scenario in which the Fed raises interest rates without triggering a recession.

“I think there is a real risk of a hard landing if the Fed doesn’t start cutting rates soon,” Ackman said, noting that he has seen signs of a weakening economy.