Cathie Wood wrote an open letter to the Fed—calling the decision to raise interest rates a “policy error.”
Key Details
- ARK Invest CEO Cathie Wood, evidently fed up with interest rate hikes, wrote an open letter to the Federal Reserve, questioning its decisions to repeatedly raise interest rates.
- In her letter, Wood says: “We offered some data for our ‘data-driven’ Fed to consider as it prepares for its next decision on November 2.”
- Wood called the Fed’s previous decision to raise rates “surprising” due to “conflicting data.”
Why it’s news
In her letter, Wood urges the Fed to follow the data she presents, warning that failure to do so could result in a world-wide deflation.
Critics were quick to point out that high interest rates have affected Wood’s company directly, providing incentive for her to argue for lowering interest rates. Wood did provide data to back up her argument.
Wood’s team of analysts at ARK suggested that inflation is already decreasing for several reasons. First, commodity prices including copper, lumber, and oil have dropped. These prices traditionally are markers of economic strength.
Next, she points to dropping home prices. In July of this year, home prices dropped for the first time since May 2020.
And finally, major retailers have high inventory levels, leading to potentially high discounts for shoppers. Additionally, used car prices have fallen.
In Wood’s view, these signs point toward an inflationary peak which will soon begin to drop back down, meaning interest rate hikes are no longer necessary.
Without changing policies, Wood argues that the Fed will send the economy into a deflation.
