The Federal Reserve shouldn’t raise its benchmark rate this week, Pershing Square’s Bill Ackman said, arguing that the banking crisis has already had the effect of a “meaningful tightening of financial conditions.”

“We have had a number of major shocks to the system,” Ackman wrote in an extended Twitter post, citing three US bank closures, the pressure on First Republic Bank and the emergency takeover of Credit SuisseGroup AG.

Elon Musk suggested the Fed drop the rate by at least 50 basis points on Wednesday, writing in response to Ackman’s post. Musk has previously called for the Fed to cut rates, arguing over the weekend that the US central bank was “operating with way too much latency in their data” given recent bank failures.

“We don’t yet know where the losses are for investors in these institutions and what the contagion effects may be,” Ackman wrote. With deposits becoming unstable, “what regional bank is going to commit meaningful capital to new construction or business loans in this context?” 

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Fed Chairman Jerome Powell should make clear a pause is temporary and signal that “his intent is to resume raising rates at the next meeting unless the banking crisis remains unresolved,” Ackman wrote. 

“This is not an environment into which the @federalreserve should be raising rates and adding additional pressure on the system as financial stability is the Fed’s first responsibility,” he added.

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