'I don't see any big, gigantic market correction' due to inflation, Carlyle's David Rubenstein says

Published Tue, Feb 8 202210:48 AM ESTUpdated Tue, Feb 8 202211:39 AM EST

Investors should not expect rising inflation or a major stock market downturn to spiral the United States into a recession , Carlyle Group co-founder David Rubenstein told CNBC on Tuesday. "I don't see any big, gigantic market correction of the type that's going to push us into a recession. I don't see that at all," the private equity billionaire said in a "Squawk Box" interview. "I think the market correction will be modest, relatively to what we've seen in the past when you have a gigantic correction." Rubenstein is no stranger to how spiking inflation can decimate markets and the economy. Before co-founding Carlyle in 1987, he was deputy assistant to the president for domestic policy in the Jimmy Carter administration from 1977 to 1981. Carter's one term in the White House was marked by out-of-control inflation and sky-high interest rates. "In the 1970s, when I was in government, we had a different situation. Inflation was double digits, [the] Fed funds rate went up to 20%. We're not looking at anything like that," Rubenstein said. While wages continue to increase in addition to prices, Rubenstein said the current dynamic is still not as dire as it was decades ago. "I don't think we have the enormous wage increase that we had in the 1970s that produced inflation. … It's likely that we'll get this under control. I don't think it's quite as systemic as we saw in the 1970s." Rubenstein sees inflation to dropping to between 4% and 5% later this year. However, Thursday's consumer price index for January is expected to show a year-over-year increase of 7.2% after a year-over-year gain of 7% in December, the fastest pace since June 1982 . "There's no doubt that the Fed needs to do something" to prevent the recovering economy from completely overheating, Rubenstein said. "I think the Fed recognizes that." While he doesn't see the Federal Reserve raising interest rates after every remaining policy meeting this year, Rubenstein said he does expect the Fed to consider a rate hike of 0.25% and likely implement one after its next meeting in March. The Fed pointed to a March rate increase after its January meeting, and the market believes that still on track, especially after Friday's strong January jobs report . "I suspect anything less than 25 basis points, which is to say no rate increase, would be a big shock," he said. "Something more than 50 basis points would also be a big shock." The market expects at least five rate hikes this year. Rates are currently near zero.

David Rubenstein, Carlyle Group speaking at the World Economic Forum, Davos, Switzerland on January 21, 2020.

Adam Galica | CNBC

Investors should not expect rising inflation or a major stock market downturn to spiral the United States into a recession, Carlyle Group co-founder David Rubenstein told CNBC on Tuesday.