Hedge fund billionaire Ray Dalio argued Thursday that the Federal Reserve has raised rates to a point where they're hurting asset prices.
The central bank needs to start looking at monetary policy's impact on asset prices before economic conditions, Dalio said, adding he would err on the side of caution on rate hikes.
The Fed has already raised rates three times this year, and one more is expected in December.
"We've raised interest rates to a level that it's hurting asset prices," the founder of Bridgewater Associates said in an interview with CNBC's "Squawk Box." "We're in a situation right now that the Fed will have to look at asset prices before they look at economic activity. It's a difficult position."
On Wednesday, Federal Reserve Chairman Jerome Powell expressed confidence in economic strength, and said markets will have to get used to the idea that the central bank could raise rates at any time starting in 2019.
Last month, Powell said the cost of borrowing money was a long way from so-called neutral, sparking concerns about a more aggressive Fed tightening that led to October being the worst month for the S&P 500 since September 2011.
President Donald Trump has repeatedly express frustration with the central bank's move to raise rates, arguing the Fed could disrupt the U.S. economic recovery.
In the CNBC interview, Dalio laughed off the notion that the Fed needs to raise rates so it would have room to make cuts if the economy were to take a major downturn. "That sounds like pretty bad logic to me," he said.
Dalio also said the U.S. is late in the business cycle, perhaps the seventh or eighth inning, and assets are "fully priced."
Bridgewater Associates is the world's biggest hedge fund, with about $160 billion in assets under management.
In June, it was revealed that Bridgewater was becoming a partnership, giving top executives there more power in running the fund. While Dalio remains co-CIO and co-chairman, he gave up his co-CEO role in March 2017.
Dalio, who started Bridgewater in his two-bedroom apartment in New York City in 1975, now has an estimated net worth of $18.1 billion, according to Forbes.