Calamos CEO John Koudounis: Fed’s Challenge to Secure “Soft Landing”

Calamos President & CEO John Koudounis cautioned on the need for a “soft landing” for the economy as the Federal Reserve (Fed) is widely expected to raise interest rates on Wednesday.

The Fed is expected to raise interest rates by a half-percentage point which is the largest rate hike in more than two decades.

It’s a clear sign of the urgency with which the Fed is approaching inflation, as prices continue to climb at the fastest pace in 40 years.

Calamos President & CEO John Koudounis said that Fed “is doing a great job at least in telegraphing what it will do.”

In an interview with Fox Business‘ Maria Bartiromo on Tuesday, he predicted that the Fed will raise interest rates one more time after Wednesday, but “after this, it will pause.”

Koudounis: The Fed has a difficult job to bring about a “soft landing”

The Fed’s intent on raising rates is to discourage spending just enough to bring down inflation without tipping the economy into recession—what economists call a “soft landing.”

Koudounis says the Fed is in a difficult position. He speculates that “It’s like driving a car that is going 100 miles an hour on a wet surface and you are trying to slam on the breaks. The chances are you are going to get into an accident. You [have] got to slow down. If it is too quick, they will choke the economy and we will go into recession if that happens.”

“We are definitely slowing down. Whether we have a recession we will see…depends a lot on the Fed,” Koudounis predicts.

A key measure from the Commerce Department last week showed prices had surged 6.6 percent during the 12 months prior to April. That’s more than three times the Fed’s target rate for inflation and the sharpest increase in prices since 1982.

The Fed hopes to tamp down demand and ease inflation by making it more expensive to borrow money.

Koudounis says that this may affect the mortgage market. “People forget that today we are 200 basis points higher than a year ago. If we stop buying mortgages—especially long term-mortgages—it’s going to increase the interest rates of buying homes. Think what that will do to the economy.”

“It is not easy. I wish them luck.”

Koudounis manages approximately $43 billion of investments

In addition to being President & CEO of Calamos Investments, a global investment firm,  Koudounis is the Founder of the Chicago CEO COVID-19 Coalition, a coalition of Chicago’s business leaders in a humanitarian campaign for COVID-19 relief and recovery.

The Chicago CEO COVID-19 Coalition is bringing together leaders of Chicago companies to benefit local Chicago charities by providing the relief that Chicago needs now for vital and long-term recovery.

Koudounis, who manages approximately $43 billion of investments, is also a founding board member and executive committee member of The Hellenic Initiative, a non-profit, non-governmental organization with the aim of supporting Greece and Cyprus in the aftermath of the financial crisis by helping to foster entrepreneurship in both countries.

He is also a member of Leadership 100 and Chairman of the Metropolis of Chicago Foundation. In October 2016, he was inducted as an Archon of the Ecumenical Patriarchate in the Order of St. Andrew, the highest honor bestowed on a layman by the Orthodox Church.