Tesla CEO Elon Musk said in an interview with CNBC’s David Faber on Tuesday that he believes the Fed was too slow to increase rates, and it will likely be too slow to lower them in the coming months.
“My concern with the way the Federal Reserve is making decisions is they’re operating with too much latency,” Musk said in the interview. “The data is somewhat stale. The Federal Reserve was slow to raise interest rates, and they’re gonna be slow to lower them.”
Musk’s opinion about the Federal Reserve’s monetary policy gives a look into what a major company leader is seeing in response to higher interest rates. As the leader of Twitter, SpaceX, and other companies in addition to Tesla, he has a broad-based view of the broader economy. It also suggests that other companies that sell high-priced luxury goods may see demand fall in the coming months.
On May 3, the Fed raised its federal funds rate by 0.25% to a target of between 5% and 5.25%. It was the Federal Reserve’s 10th interest rate increase in just over a year. But Fed officials also dropped tentative hints that it may stop raising rates in the near future.
Musk says that the next 12 months will be difficult for Tesla and other companies from a macroeconomic perspective because of increased interest rates pinching consumer budgets.
“You can think of raising the Fed rate as somewhat of a brake pedal on the economy, frankly,” Musk said. “It makes a lot of things more expensive. So if the car payment or your home mortgage is absorbing more of your monthly budget then you have less money to buy other things.”