Ken Griffin Calls Fed Hikes 'Surgery With a Dull Knife'

Citadel CEO Ken Griffin said the Federal Reserve’s rate hikes are like performing “surgery with a dull knife” in that they harm businesses sensitive to high interest rates.

Griffin made his remarks in an interview with Bloomberg after Federal Reserve Chairman Jerome Powell testified rates are likely to need to go “higher than previously expected” to tame inflation, the New York Post reports.

“In fairness to the Fed, the interest rate tool, as a means of culling inflation, is like having surgery with a dull knife,” Griffin said.

“It is a really difficult tool to get the job done with, because you hit the housing sector, you hit the manufacturing sector, you hit parts of the economy that have a very high sensitivity to interest rates, and you tend to leave the rest of the economy relatively untouched,” the billionaire hedge fund manager said.

“The Fed doesn’t have as much impact with their tool as you might hope,” Griffin said, adding that the Fed is in “unchartered territory.”

Powell’s testimony before Congress this week indicates that the Fed must now move more aggressively to tame inflation, Griffin said.

The Fed had been “clearly telegraphing that 25 basis points would be the prevailing hike for the early part of the year,” Griffin said. Powell had also indicated that the Fed, “in some sense, was comfortable taking the foot off the brake and seeing where the economy lands,” Griffin added.

Powell’s latest remarks “created space to move” by 50 basis points or more on the next hike, Griffin said.

If he could advise the Federal Reserve on how to tackle inflation, now at 6.4%, Griffin said it would be to strictly say that it will continue to increase the Fed funds rate until it sees a clear path back to its 2% target inflation.

“I would tell the chairman to say less,” Griffin said, just simply: “‘We are going to put the inflation genie back in the bottle and do what it takes to make that happen. We are going to raise rates consistently until we see very clear evidence we have put this behind us.’”

Griffin added that rate at which inflation has spiked over the past year has been “traumatic” for American households and that the U.S. economy has a “setup for a recession unfolding.”