The Fed is finally doing all the right things - but the US is still likely enter a recession, billionaire investor Sam Zell says

• The Fed is finally doing all the right things, but the US will still likely enter a recession, Sam Zell warned.
• Zell criticized the Fed's delayed response to inflation and its expansion of its balance sheet, which fueled inflationary pressures.
• "The likelihood is that we're going to have a recession. Frankly, that's what happens when you flood the world with money and everything is free."

The Fed is finally doing all the right things – but it won't help the US avoid a recession, according to billionaire investor Sam Zell, warning of more pain ahead as the central bank scrambles to bring down inflation.

"I think the Fed is doing all the right things now, reflective of the fact that the Fed didn't do all the right things earlier this year. " Zell said in an interview on CNBC on Thursday, shortly after the Fed delivered another 75 basis point rate hike on Wednesday. That's the fourth rate hike of that size this year as officials aggressively try to rein in prices.

But experts have criticized the aggressive pace of monetary tightening, with some warning it could overtighten the economy and plunge the US into a recession. Economists like Mohamed El-Erian say the Fed's insistence that inflation was "transitory" through much of 2021 led to an aggressive rate hike cycle that could have been avoided. 

"The concept of transitory inflation is pretty awful, and I've never heard that phrase before," Zell said.

The Fed's massive expansion of its balance sheet in previous years has also contributed to inflation flying at current levels, clocking in at 8.2% in September's Consumer Price Index report. The central bank expanded its balance sheet to $8.9 trillion in recent years, flooding the market with liquidity inflating asset bubbles across various sectors. 

Central bankers are now trying to trim that balance sheet by $95 billion a month – but depriving the markets of liquidity when conditions have been lax for so long means markets are fragile. Zell blasted that as another Fed policy mistake.

"Eight trillion dollars? And how could you not expect that to create inflation?" he said, warning that near-10% inflation signaled the US was in a "serious scenario."

"The likelihood is that we're going to have a recession. Frankly, that's what happens when you flood the world with money and everything is free. You lead to excess, and excess ultimately leads to a recession," Zell said.

Other top commentators have voiced similar concerns. JPMorgan CEO Jamie Dimon warned the US could see a recession in the next six to nine months, causing the stock market to fall another 20%. "Dr. Doom" economist Nouriel Roubini warned of an even steeper drop, with stocks plunging by 40%.