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- The market is wrong to expect Fed rate cuts anytime soon, Blackstone's Jonathan Gray said.
- The Fed will likely pause rate hikes or tighten by another quarter-point, he told the Financial Times.
- Rates are likely to stay higher for longer due to sticky inflation, he added.
Despite what markets may currently signal, the Federal Reserve is unlikely to start easing interest rates anytime in the near future, Blackstone President Jonathan Gray said.
Instead, the central bank will probably keep rates at or near where they are now as inflation remains sticky, he told the Financial Times.
"The Fed is likely to pause or maybe go 25 basis points higher from here, but I think they're unlikely to pivot as quickly as the market is expecting," Gray said.
Policymakers will meet May 2-3, and markets widely expect a quarter-point hike to 5%-5.25% with odds pointing to rate cuts later in the year, according to CME's FedWatch Tool.
But Gray predicted the Fed would "hold rates at an elevated level for an extended period of time" to snuff out lingering inflation.
While inflation has cooled sharply in the past year, the March consumer price index report showed a 5.2% increase — still considerably higher than the Fed's 2% goal.
Gray also acknowledged that higher rates could add stress on the banking industry, which has seen deposits flee regional lenders in the wake of Silicon Valley Bank's collapse in March.
But while some economists, such as Nouriel Roubini, have warned that high interest may create more instability, Gray thinks that worries of an industry-wide collapse are unwarranted:
"It's possible we could see further incidents, but I don't think there's a systemic problem because we don't have a systemic credit problem," he told the FT.