Michael Milken attends the Prostate Cancer Foundation Dinner at Daniel on November 19, 2019 at Daniel in New York City.
Paul Bruinooge | Patrick McMullan | Getty Images
Famed investor Michael Milken expects the Federal Reserve to move slowly on monetary policy — if history is any guide.
In fact, the founder of the Milken Institute expects that the central bank will be sure to curb inflation before starting to cut interest rates, to avoid a repeat of the 1970s, when inflation soared in double digits, Milken said on CNBC’s “Last Call.” on Monday. He spoke from the Hope Global Forum in Atlanta.
“History, as you know, repeats itself in different ways,” Milken said. ‘In the 1970s, the Fed moved too early. And yes, we came from that period of ’74, ’75, ’76. But in the late 1970s we had massive inflation again, with a rise in overnight interest rates. up to 21%.”
“And so I think my view right now is that the Fed will probably slip a little bit of discipline today to see what happened,” Milken added.
Inflation and interest rates soared in the early 1970s before the Federal Reserve reversed policy. However, this stop-and-go approach ultimately failed to suppress rising prices.
Fed Chairman Jerome Powell will announce the central bank’s latest monetary policy decision Wednesday afternoon, after which investors will watch his comments to see if there are signs the central bank expects to cut rates.
In the 1980s, Milken was known as the king of junk bonds. The financier was an early pioneer of leveraged buyouts and pleaded guilty in 1990 to securities fraud and tax violations. In 2020, he was pardoned by President Donald Trump.
–CNBC’s Yun Li contributed reporting.