NEW YORK, July 16 (Reuters) - Billionaire investor Stanley Druckenmiller took another swipe at U.S. central bank policies on Wednesday, warning that continued low interest rates were too risky and could create fresh problems in the years ahead.
“Today’s Fed policy seems not only unnecessary but fraught with unappreciated risk,” said Druckenmiller, who has studied central bank policies for decades, made billions with bets on currencies and interest rates and averaged annual compounded investment returns of 30 percent.
“I‘m not even sure it’s going to end badly,” said Druckenmiller, who helped billionaire investor George Soros earn $1 billion by betting against the British pound in 1992.
“What I am sure is they’re making a bad bet, a bad risk reward,” he added.
Speaking in characteristically blunt terms at the CNBC Institutional Investor Delivering Alpha Conference, Druckenmiller said he worried that the Fed’s easy-money policies would have negative consequences.
“I really hope I am wrong in my assessment, I really do ... The problem is the Fed is making a bet from which their adjustment could be way too late and have significant adverse consequences,” he said.
The negative effects were already being seen in the initial public offerings market, he said, adding that current policies were encouraging investors to take riskier bets.
While Druckenmiller said easy-money policies were critical to stabilizing the economy after the financial crisis, sticking with them now was a mistake.
“We should be debating why we haven’t moved more meaningfully toward a neutral Fed funds rate,” Druckenmiller said.
“Frankly, I don’t know what it is in their forecasting record that makes them confident,” Druckenmiller said, one day after Federal Reserve Chair Janet Yellen said that labor markets were not healthy yet. She signaled that the Fed will keep monetary policy loose until hiring and wage data showed the effects of the financial crisis were completely gone.
“I‘m not even sure it’s going to end badly. What I am sure is they’re making a bad bet, a bad risk reward.”
Druckenmiller, 61, closed down his Duquesne Capital Management in 2010 and said he no longer had the guts to make the kind of super-sized bets he made during his career. (Reporting by Svea Herbst-Bayliss; Editing by Jeffrey Benkoe)