Billionaire venture capitalist Chamath Palihapitiya warns that the Fed is on track to repeat past mistakes this year amid flawed data and slow policy responses.
Palihapitiya says on the social media platform X that the Fed has a track record of being late when it comes to adjusting interest rate policy based on changing economic conditions.
The billionaire notes that the Fed was late more than 15 years ago, and it will likely be late again this year.
“The Fed has been seriously wrong in setting interest rate policy in the past. The most egregious example was going into the GFC (Global Financial Crisis) – they completely blew the jobs picture, stayed pat and then had to scramble.
Here we are again.”
But Palihapitiya says the blame does not rest solely on the Fed, noting that the Bureau of Labor Statistics (BLS) is providing outdated snapshots of a fast-changing economy, leading policymakers to act on flawed inputs.
“The BLS’s data collection is too sterile and slow for a dynamic economy like the US. We need to have a real-time reporting framework that allows multiple free market participants to ingest and interpret critical data so that we have an accurate sense of jobs and other economic indicators.
The Fed, acting on this sterile BLS data, is destined to be wrong again in 2025. They are too late to cut.
If we don’t fix this system, we will entice avoidable economic disruptions in the future, and the magnitude of them will grow, as the errors in the data grow. Scott [Bessent] and his team can only do so much if he has to constantly fight bad data from BLS and a slow team at the Fed.”
Last week, trillion-dollar asset manager Allianz slammed the Fed for keeping interest rates steady over the past year despite a softening job market. Allianz chief economic advisor Mohamed El-Erian says the Fed should have cut interest rates as early as July.