You’re here CEO Elon Musk said in an interview with CNBC’s David Faber on Tuesday that he thinks the Fed is too slow to raise rates, and will likely be too slow to cut them in the coming months.
“What concerns me about the way the Federal Reserve makes its decisions is that it operates with too much latency,” Musk said in the interview. “The data is somewhat outdated. The Federal Reserve has been slow to raise interest rates, and it’s going to be slow to lower them.”
Musk’s take on the Federal Reserve’s monetary policy provides insight into what a major business leader sees in response to higher interest rates. As the leader of Twitter, SpaceX and other companies besides Tesla, he takes a broad view of the broader economy. It also suggests that other companies that sell high-priced luxury goods could see lower demand in the coming months.
On May 3, the Fed raised its federal funds rate by 0.25% to reach a target of between 5% and 5.25%. It was the 10th interest rate hike by the Federal Reserve in just over a year. But Fed officials have also hinted that it may stop raising rates in the near future.
Musk says the next 12 months will be tough for Tesla and other companies from a macro perspective as rising interest rates squeeze consumer budgets.
“You can frankly think of the Fed rate hike as kind of a brake pedal for the economy,” Musk said. “It makes a lot of things more expensive. So if the car payment or your mortgage takes up more of your monthly budget, you have less money to buy other things.”