“Global Hedge Fund King” Warns of Sticky Inflation: Don’t Underestimate the Harm of 3% Inflation

For Ken Griffin, founder and CEO of Citadel, the world’s largest hedge fund, the political impact of persistently high inflation cannot be ignored.  

 

 

In an interview on Thursday, the “global hedge fund king” said, “American voters are already fed up with inflation.”  

 

While U.S. inflation has dropped significantly from 9% in 2022 to 2.9% in the latest CPI report, tariff policies have kept inflation sticky. The Fed’s preferred gauge, the core PCE price index, rose 2.9% in August, unchanged from July.  

 

Griffin predicts inflation will stay in the 2-3% range next year, above the Fed’s 2% target.  

Inflation Matters

In 2024, high living costs were a key issue in Trump’s re-election campaign. Polls showed many voters blamed Democratic policies, including stimulus plans, for sustained high expenses.  

 

Griffin noted, “There’s no question the president and Republicans came to power because of growing public frustration with inflation. At the same time, I wouldn’t underestimate the harm a 3% inflation rate does to tens of millions of American families.”  

 

Inflation is expected to remain a major issue in next year’s midterm elections, where Republicans aim to hold their slim House and Senate majorities, while voters are losing faith in Trump’s economic policies.

 

A recent Reuters/Ipsos poll showed only 28% approve of Trump’s handling of living costs, and a YouGov/Economist poll found his economic approval rating at a record low of 35%.  

Fed Independence  

Trump has faced criticism for pressuring the Fed and threatening its independence, including attempts to appoint loyalists, publicly calling for lower rates, and trying to oust current governors—seen as moves to manipulate monetary policy for political gain.  

 

Griffin believes preserving the Fed’s independence benefits Trump. “If I were president, I’d let the Fed do its job. I’d give them as much ‘apparent’ and ‘actual’ independence as possible, because the Fed often has to make tough choices,” he said.  

 

Earlier this month, the FOMC cut rates by 25 basis points to bolster a weakening job market, despite months of pressure from the Trump administration on Fed Chair Jerome Powell and other members to lower rates.  

 

Griffin warned that undermining Fed independence could blur the lines between the White House and the central bank: “If the president is seen as controlling the Fed, what happens when those tough choices have to be made?”