A nightmarish prediction for the borrowers formulated by the veteran investor and founding partner of Mobius Capital Partners, Mark Mobius, predicting that the Fed may raise interest rates by 9%.
Speaking to Bloomberg TV, Mobius said that because the inflation remains stubbornly high, “the Fed will have to raise interest rates higher than inflation to kill inflation.”
Mobius made similar comments while speaking on CNBC’s Squawk Box a short time earlier, where he argued that he does not rule out the US central bank raising benchmark rates by 1%-2% at each meeting to outpace the rate of inflation.
Mobius’ comment comes a day after the Dow Jones Industrial Average suffered its worst collapse in two years, following the latest inflation readings in the US.
Inflation eased slightly year-on-year to 8.3%, after climbing to 9.1% in July.
Mobius also raised the issue of cryptocurrencies, noting that the Fed ignores the risks that represent.
“Policymakers are not paying attention to cryptocurrencies, yet they are turning over trillions of dollars,” he said.
While cryptocurrencies are not as important a focus as the currency supply, according to Mobius, digital assets “have wealth implications for a great many people.”
In closing Mobius added that he specifically sees bitcoin as an important indicator of where the markets will go in the future.
Pain is coming to the markets
It is worth noting that a week ago, Mark Mobius, asked about the move in the markets, had stated black predictions that spoke of “more pain ahead”.
“The picture looks very bad and I think it will get worse,” he replied, “because the European Central Bank will dramatically raise interest rates to reduce inflation.”
Then the Fed will follow suit to stop excessive strengthening of the dollar, which can hurt the competitiveness of U.S. exports, he added.
But if the Fed raises interest rates beyond the level needed to contain inflation, economic growth and asset prices will come under strong downward pressure Mobius continued.
With regard specifically to the Europe, Mobius warned that the region’s energy crisis will worsen over the winter, as rising fuel prices will reduce consumer demand and force factories to reduce production or close down.
“This is a very bad scenario for Europe“, he said. “And there the situation will get worse before it gets better,” concluded Mobius.