Michael Milken attends the Daniel’s Prostate Cancer Foundation Dinner on November 19, 2019 at Daniel’s in New York City.
Paul Bruenog | Patrick McMullan | Getty Images
Famed investor Michael Milken expects the Fed to move slowly on monetary policy — if history is any guide.
In fact, the Milken Institute founder expects the central bank to make sure inflation is curbed before starting to cut interest rates to avoid a repeat of the 1970s, when inflation rose to double digits, Milken said on CNBC’s “Last Call.” on monday. He was speaking from the Global Hope Forum in Atlanta.
“History, you know, repeats itself in different ways,” Milken said. “In the 1970s, the Fed moved too early. So, yes, we came out of that period of ’74, ’75, ’76. But we had massive inflation at the end of the ’70s again, with overnight rates rising to 21%.”
“So I think my view now is that the Fed is probably getting a little wrong about discipline today to see what happens,” Milken added.
Inflation and interest rates rose in the early 1970s before the Federal Reserve reversed its policy. But this stop-and-go approach was ultimately unsuccessful in curbing price increases.
Federal Reserve Chairman Jerome Powell will announce the central bank’s latest monetary policy decision on Wednesday afternoon, when investors will review his comments for signs of when the central bank expects to start cutting interest rates.
In the 1980s, Milken was known as the king of junk bonds. The financier was an early pioneer in leveraged buyouts, and in 1990, he pleaded guilty to securities fraud and tax violations. In 2020, he was pardoned by President Donald Trump.
–CNBC’s Yun Li contributed reporting.