Barry Sternlicht warns the economy is facing a sharp slump as the Fed uses 'a steamroller to get the price of milk down 2 cents'

Barry Sternlicht
Billionaire investor Barry Sternlicht slammed the Federal Reserve's heavy-handed interest-rate hikes Thursday. PATRICK T. FALLON/AFP via Getty Images

  • Barry Sternlicht warned Thursday that a sharp economic downturn is coming in the US.
  • The billionaire investor also slammed the Federal Reserve's heavy-handed approach to interest-rate hikes.
  • Jerome Powell "is using a steamroller to get the price of milk down two cents, to kill a small fly," Sternlicht said.
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The Federal Reserve's interest-rate hiking campaign is going to trigger a sharp economic downturn in the US, according to billionaire investor Barry Sternlicht.

"You do not have to see the car hit the wall to know it's going 8,000 miles an hour and it will hit the wall," the Starwood Capital CEO told CNBC's "Squawk Box" on Thursday.

"The economy will have a 'hard landing'," Sternlicht added, referring to the scenario where the central bank fails to avoid a severe economic slump while bringing inflation down to its 2% target. "[Fed chair Jerome Powell] is using a steamroller to get the price of milk down two cents, to kill a small fly."

Sternlicht's comments came after the Fed raised interest rates for the ninth time in a row Wednesday.

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The central bank has lifted borrowing costs from near-zero to around 5% over the past year in a bid to tame soaring inflation, which is still running hot at 6%.

Its tightening campaign has started to slow wage growth – with average hourly earnings rising just 0.2% last month.

That's a sign that Powell is now just crushing "good inflation" that would make everyday Americans richer as it blindly presses ahead to its 2% target, Sternlicht said.

"I think it's time we changed the conversation – there's good inflation and bad inflation," he told CNBC. "Good inflation is wage inflation."

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"He's limiting inflation to 2%, so the guy making $15 an hour is going to get a 30-cent raise," Sternlicht added. "That's not something this country should celebrate."

Read more: Victims of the Fed: How a year of rate hikes cratered stocks - and fueled the demise of FTX and Silicon Valley Bank

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