Elon Musk calls for a 50 basis-point rate cut ahead of the Fed's meeting

Elon Musk calls for a 50 basis-point rate cut ahead of the Fed's meeting

Elon Musk, CEO of Tesla, SpaceX, and Twitter, has expressed his opinion on the Federal Reserve's benchmark interest rate. In a tweet, Musk said that the Fed "needs to drop the rate by at least 50bps on Wednesday." This statement comes just ahead of the Federal Open Market Committee's (FOMC) two-day meeting, which is expected to reveal whether the benchmark rate will see a lifting or lowering.

Musk's call for a 50-basis-point drop in the rate was prompted by Bill Ackman, who argued in a tweet for a pause by the Fed. According to Ackman, there have been "a number of major shocks to the system," including a trio of banks in the U.S. recently shutting down and developments with Credit Suisse and other events in the banking sector.

However, Ackman believes that the Fed needs to continue to show resolve in combating inflation, which he describes as "still a problem." He suggests that Powell should pause and make it clear that this is a temporary pause so that the impact of recent events can be assessed. He can then make it clear that his intent is to resume raising rates at the next meeting unless the banking crisis remains unresolved and has on its own sufficiently slowed the economy.

According to CME's FedWatch tool, about 83% of interest rate traders indicated they expect a hike coming out of the FOMC meeting slated to end Wednesday. On the other hand, 16.6% projected the rate will stay flat. Musk has weighed in on the Fed's moves regarding interest rates in the past, including in tweets and Tesla earnings calls.

It remains to be seen how the Fed will respond to these calls for action, as well as the current state of the economy. With ongoing concerns about inflation, banking stress, and other factors, it is a challenging time for the central bank to make decisions that will affect the future of the U.S. economy.