Elon Musk accuses Fed of ‘looking in the rearview mirror’ with rate hikes

Elon Musk issued a stern warning this week to the Federal Reserve as it embarks on one of the most aggressive campaigns in decades to crush out-of-control inflation. 

The U.S. central bank, he said, is raising interest rates too high, too quickly – even though the Tesla CEO believes the economy has entered a period of deflation. 

“There’s more deflation than inflation,” Musk said on Wednesday during Tesla’s third-quarter earnings call. “I’m going to make this point over and over again to the Fed, and the Fed is not listening because they’re looking at the rearview mirror instead of looking out the front windshield.”

This is not the first time that Musk has taken a shot at the U.S. central bank, which is trying to rein in stubbornly high inflation that is still running near the hottest pace in four decades. 

THESE BUSINESS TITANS ARE SOUNDING THE ALARM OVER THE US ECONOMY

Tesla CEO Elon Musk called for more drilling and fossil fuel resources on Monday, August 29, 2022, warning humanity could be ‘in trouble’ if exploration is curtailed. (AP Photo/Jae C. Hong, File / AP Newsroom)

The wealthiest man in the world first expressed concern in September that the Fed risks deflation with its rapid rate hikes, and called on policymakers to cut rates by 25 basis points. 

Instead, the Fed voted to lift the benchmark federal funds rate by 75 basis points, the third straight hike of that magnitude. Officials have shown no signs of slowing down, with the Fed’s benchmark currently in a target range of 3% to 3.25% – near restrictive territories. 

Policymakers are widely expected to approve a fourth straight 75-basis-point hike when they next meet in early November. 

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In a troubling development, however, the Fed’s rate hikes have thus far failed to tame inflation: The government reported last week that the consumer price index soared 8.2% in September from the previous year, faster than expected. Even more concerning, core prices – which exclude more volatile measurements of food and gas – jumped 6.6%, the fastest since 1982.

Jerome Powell, chairman of the U.S. Federal Reserve, speaks during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, D.C., U.S., on Wednesday, May 4, 2022.  (Photographer: Al Drago/Bloomberg via Getty Images / Getty Images)

That indicates the Fed will have to continue charting its aggressive course, raising the odds that it will crush consumer demand and cause unemployment to rise. 

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Musk is just the latest CEO to sound the alarm over the deteriorating U.S. economy. JPMorgan CEO Jamie Dimon, Amazon founder Jeff Bezos and Goldman Sachs CEO David Solomon have all expressed concern that the U.S. is headed for a recession as a result of higher interest rates.

Economic growth already contracted in the first two quarters of the year, with gross domestic product – the broadest measure of goods and services produced in a nation – shrinking by 1.6% in the winter and 0.6% in the spring, signaling the start of a technical recession.