Some Top Money Managers Push for Fed to Start Raising Interest Rates

The Fed is out of step with Wall Street, say some of the country’s wealthiest investors.

If there was one thing that hedge fund managers kept coming back to time and time again at the CNBC Delivering Alpha conference on Wednesday, it was that the Federal Reserve should start thinking about raising rates.

That was the message from the financier Stanley F. Druckenmiller, who said the time had passed for the Fed to keep interest rates near record low levels to revive the economy. Armed with charts, the billionaire investor said jobs, retail sales and household debt had all recovered from the worst financial crisis in decades, thanks largely to the emergency steps taken by the Fed to keep the economy from falling off a cliff.

But he said the Fed should begin raising rates, even if it meant a bear market in stocks in the short-term to avoid the kind of excesses that led to the financial crisis from recurring.

“Today’s Fed policy seems not only unnecessary but fraught with unappreciated risks,” Mr Druckenmiller said, accusing the Fed of employing a policy of financial engineering.

Paul Marshall, the chief investment officer and chairman of the investment firm Marshall Wace, went even further, saying the Fed and Janet Yellen, the Fed chairwoman, were out of step with the markets.

“The risk is the Fed is perceived to be behind the market,” he said.

Mr. Marshall also said Ms. Yellen should “stick to the day job.” The jab was a direct reference to Ms. Yellen’s comments on Tuesday in Washington, where she said during the Fed’s monetary policy report to Congress that biotechnology and social media stock valuations were stretched.

The comment from Mr. Marshall prompted an audience of hedge fund faithful to laugh.

“There are issues in her day job which are really important that she has not necessarily so far been proved right on,” Mr. Marshall said.

He added that the unemployment rate in the United States was well below the threshold that has typically prompted the Fed to act, and, he said, to the rest of the world, the United States’ economy looked fine.

“Certainly the perception from the rest of the world — from little old U.K. – is that the economy is in very good shape.”

Kenneth C. Griffin, the billionaire founder of Citadel Investment Group who tends to be critical of the government, threw Ms. Yellen a line on Wednesday.

“She’s very thoughtful,” he said in a one-on-one interview. ”It’s very difficult to halt a rate hike cycle in a sense midcycle. You’re much better off waiting before you raise rates than raising rates and having to stop or roll back that rate increase prematurely.”

Mr. Druckenmiller’s criticism of the Fed is not new. It’s a message he has been delivering in public forums for more than a year. He was one the first and a loudest critics among hedge fund managers to come out criticize the Fed for its policy of buying of $85 billion in mortgage securities and Treasury bonds a month — a policy that the Fed is now in the process of winding down.