‘Big Short’ investor Michael Burry warns of ‘inflation spike’

The Federal Reserve implemented a series of sharp interest rate hikes last year in an effort to cool decades-high inflation and signaled that more increases are in store in early 2023. Inflation rose by 7.1% in November – the lowest rate of increase in a year.

Last month, Fed Chair Jerome Powell signaled policymakers hadn’t made any decision on the size of its next interest rate bump – though he reiterated the bank will keep hiking rates and hold them in restrictive territory for some time to ensure prices have cooled before approving any cuts.

Burry is one of a growing number of voices flagging the rising risk of an economic downturn.

During an appearance on Bloomberg Television on Tuesday, former New York Fed President William Dudley said a US recession was “pretty likely” – though he argued the Fed will be able to avoid a severe slump.

“What’s different this time I think is that if we have a recession, it’s going to be a Fed-induced recession and the Fed can end the recession by subsequently easing monetary policy,” Dudley said.

In November, Burry argued the US economy was essentially doomed to a “multi-year recession” because the Fed lacked any good options to avoid a downturn.

The Scion boss has also warned that current conditions would be “worse than 2008” in a reference to the financial calamity seen during the Great Recession. Burry became famous for betting against the housing market just before its collapse in that cycle.

Burry is an enigmatic presence on Twitter, where he has more than 1.2 million followers and references his economic doomsaying by using the nickname “Cassandra.” The hedge fund chief typically deletes his tweets shortly after they are posted, but there are multiple accounts that save and repost his messages.

Last month, Burry abruptly deactivated his Twitter account entirely, though he returned to the platform within days.