The Federal Reserve’s ninth interest rate increase in a row last week left experts worried about the economic impact—some called it “unnecessary” while others predicted an economic crisis. But one legendary investor, who expects even more rate hikes as the Fed battles inflation, says the economy will be resilient.
“There is no question they are going to continue raising interest rates because the goal of 2% inflation is far away,” Mark Mobius, the founder of Mobius Capital Partners and well-known money manager, said in an interview Sunday with CNBC’s Squawk Box Asia. “We are now looking at what, 5–6% inflation rate in the U.S.”
The Fed’s recent rate hike came after a consistent eight month-drop in inflation since mid-2022. In February, inflation stood at 6% year over year, down from January’s 6.4% and significantly below the four-decade high of 9.1% last June.
According to Mobius, although the Fed will likely continue interest rate hikes, the economy won’t bear the brunt of it.
“They [the Fed] want to continue raising interest rates without necessarily causing problem with the economy,” Mobius said.
“If you look at money supply in America, it’s gone down, but not much,” he said, adding that the U.S. and China still show signs that they are robust. “So, I think we’re in a situation where the economies will do fairly well in spite of the rising interest rates in the U.S.”
The strong money supply, which simply means the amount of money in circulation, coupled with infrastructure and industrial spending by the government, would keep the economy from taking a hit, according to Mobius. He said that the low U.S. unemployment rate reflects this.
