Chamath @ 00:09:56Right
economy
To break U.S. inflation, the Federal Reserve will ultimately have to raise the federal funds rate to at least 5.5–5.75%, implying further rate hikes above the then-current 4.75–5.0% range.
we've known since Volcker era what we need to do to do that, which is you need to get interest rates to be greater than terminal inflation, which means that if 5% fed funds rate is insufficient. So we're going to need to see a print of five and a half, 5.75%.View on YouTube
Explanation
Chamath argued in March 2023 that a 5% federal funds rate would be insufficient to tame U.S. inflation and that the Fed would need to raise rates to around 5.5–5.75%, saying “we’re going to need to see a print of five and a half, 5.75%.” At that time, the target range had just been raised to 4.75–5.00% (upper limit 5.0%) on March 22, 2023. (ycharts.com)
What actually happened to rates:
- The Fed continued hiking after this episode, raising the target range to 5.00–5.25% on May 3, 2023 and then to 5.25–5.50% on July 26, 2023. (ycharts.com)
- According to the Fed’s own Monetary Policy Reports, the FOMC then held the federal funds rate at 5.25–5.50% from late July 2023 through mid‑September 2024 before beginning to cut. (federalreserve.gov)
- The rate never went higher than that; the upper limit peaked at 5.50%, not 5.75%. (ycharts.com)
What happened to inflation:
- Core PCE inflation (the Fed’s preferred gauge) was 4.7% in Q1 2023 and had fallen to 2.1% by Q4 2023, then hovered around 2.6–2.9% in 2024–2025, well below its 2022 peak but still somewhat above the 2% target. (ycharts.com)
- Core CPI fell from roughly 5.5–5.6% year‑over‑year in early 2023 to about 3% by late 2024/2025, indicating that the post‑pandemic bout of high inflation had been substantially reduced. (trendonify.com)
Assessment:
- His core quantitative call—that the Fed would need to take rates above 5% into roughly the mid‑5s to get on top of inflation—was borne out: the target range reached 5.25–5.50%, and inflation fell sharply from 2022–23 highs while rates were held at that level. (ycharts.com)
- He did slightly overshoot the precise top (5.75% never materialized), but the realized peak (5.25–5.50) lies within the lower end of the band he gave and matches his statement that a simple 5% rate was insufficient.
Given that the Fed did raise rates above 5% into the mid‑5% area and that this coincided with a decisive moderation of inflation, the prediction is best scored as right (directionally and approximately correct, with minor overestimation of the exact peak).