Billionaire investor Ray Dalio said in a note Tuesday that the Fed’s fight to quell soaring inflation would most likely come at the “great cost” of weakening the U.S. economy and stagflation.
Dalio said in his post on LinkedIn that stagflation, which is a combination of sluggish growth and high inflation, is now his base case for the course America’s economy will take as the Federal Reserve tightens monetary settings after years of easy money.
“Over the long run the Fed will most likely chart a middle course that will take the form of stagflation,” Dalio said, arguing that, by keeping monetary policy too loose for too long, the U.S. central bank is basically stuck with having to adopt inflation-fighting policies that will likely lead to a contraction in private credit growth and weaken the economy….