The US will enter a recession as soon as this year and the Fed can't stop food and energy inflation, hedge fund manager Kyle Bass says

4 weeks ago 29
  • The US could hit a recession by this year or early 2023, according to hedge fund manager Kyle Bass. 
  • "We're in a scenario where we have a stagflationary environment," Bass told CNBC Thursday.
  • At the same time, the Fed won't be able to stop energy and food prices from climbing higher. 

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The US could hit a recession before the end of this year or by early 2023, according to the chief investment officer of Hayman Capital. 

"While the [ Federal Reserve 's] knee-jerk reaction to the COVID outbreak was let's say necessary, in the end, clearly printing 40% more money than was in circulation in the first place was a little too much," Kyle Bass told CNBC Thursday. 

The easy-money policies during the pandemic have brought the Federal Reserve a steep challenge in bringing the economy down softly. 

Now, Bass explained, the central bank will struggle to taper its balance sheet while controlling the influx of cash from the last two years. 

"We're in a scenario where we have a stagflationary environment," Bass said. "I think the economy's going to cool off, I think we'll have a recession by the end of this year or the beginning of next year."

Bass doesn't expect the central bank to hike rates more than 200 basis points before they'll have to pause and change course. 

And, at the same time, rising food and energy prices will continue to hit the US, and that's something the Fed won't be able to control, according to Bass. 

"There's two things they can't change, they can't change the global supply problem for hydrocarbons, which has been based upon a decade of bad policy, and they can't change the price of food," he said. 

On Wednesday, World Bank President David Malpass warned that the recent surge in food, energy, and fertilizer prices could lead to negative GDP growth across the whole world, and he cautioned that a global recession looks inevitable

"We're going to see energy and food prices march higher over the next year…and unfortunately the Fed's monetary policy just can't change that."

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