That’s the conclusion of Luke Ellis, CEO of Britain’s Man Group, the world’s largest publicly listed hedge fund manager, during an interview with Bloomberg Television.

The Fed is expected to announce later on Wednesday its fourth straight 75 basis point interest rate hike, with many investors looking for any clue policymakers are pivoting from the current tightening cycle that has sent stock markets tumbling last month to two-year lows.

“They need to cause a change in the U.S. employment market, that’s what they’re gonna need to do to get rid of inflation,” he said on Wednesday during an investment summit in Hong Kong. “At some point you’re going to get a recession in the U.S., that’s sort of inevitable.” 

Ellis said inflation would dip to a more moderate pace of 3.5% to 4% next year, a near certainty as the past year of high inflation is fully digested. While prices will remain high, their annual gains will look less egregious purely from a mathematical perspective as the calendar effects start to wash out. 

He warned many market participants cannot remember living through a time of high inflation and were subsequently too complacent since the environment had thus far rewarded all types of speculation, especially when turbocharged through “leverage,” or the use of debt to fund bets. 

Narrow runway for soft landing

“The last 10 years has been in the end the easiest time to invest that anyone has ever seen. It didn’t matter what you bought,” said the Man Group CEO. “Whether it was equities or bonds, whether it was U.S., Asia—it didn’t matter—just buy stuff, buy as much of it, as much leverage, either explicit or implicit in the portfolio, and you did incredibly well.”

In his opinion, the widely held view in the market that an end in rate hikes will come sooner rather than later is wrong. Ellis believes the Fed will continue to push ahead until joblessness starts to creep up, and this is what will cause the overall economy to eventually shrink in size.

As things stand, U.S. job growth only slowed moderately in September, while the unemployment actually rate dropped to 3.5%, matching a 53-year low. The latest data for October nonfarm payrolls is scheduled for Friday.

While Ellis did not explain his reasons, they may be owing to so-called second-round effects, in which higher consumer prices collide with a tight labor market.

The result is higher wage demands that create fresh inflationary pressures—a bane, according to economists and central bankers, since it can eventually spiral out of control if expectations take root that prices will stay high.

This is why the Fed is slamming on the brakes hard even if it means a recession.

“There’s a theoretical soft-landing runway, but it’s so thin you would not want to try to land a plane in a hurricane in it,” Ellis said.