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Steve Cohen says the Fed may have a hard time getting inflation down to its goal

Steve Cohen, Chairman and CEO of Point72, speaking to CNBC on April 3, 2024.

CNBC

Billionaire hedge fund manager Steve Cohen said Wednesday it would be difficult for the Federal Reserve to return inflation to its 2% target.

“The Fed thinks the inflation rate will eventually get back to 2%…I think it’s going to be difficult,” Cohen told CNBC’s Andrew Ross Sorkin on “Squawk Box.”

Inflation was falling at the end of 2023, but this data had several positive surprises during the first quarter of this year. That has led economists and traders to worry that inflation could prove “sticky” above the Fed’s target level, complicating the path to rate cuts.

Point72’s CEO said Wednesday that there is a lot of “underemployment” in the country, which could create upward pressure on inflation if economic growth remains strong.

“If growth is too fast, then the constraints on work and wages start to increase, and that can be a problem. … We’re in one of those problems where I don’t think a lot of people know exactly what’s happening. will happen,” Cohen said.

Despite his concerns about inflation, Cohen said he did not disagree with market estimates that three cuts would be expected this year.

“I think inflation has been somewhat contained, and I think ultimately the question will come down to whether that’s a true statement or not,” Cohen said.

Cohen also expressed general confidence in the stock market. He said the current market rally is not a bubble like the dot-com boom of 1999 and is instead due in part to investors pricing in future growth from artificial intelligence.

Cohen said AI is a “really enduring theme” that will impact a wide variety of businesses.

“If you’re a business and you don’t think about it, you’re going to wake up one day and say ‘we’re in trouble,'” Cohen said.

Cohen has a long history of stock trading success, and he made much of his fortune as a hedge fund manager at SAC Capital before the firm was shut down following a regulatory investigation. He also owns the New York Mets.

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