(Bloomberg) -- U.S. equity markets are primed for a correction as the Federal Reserve prepares to boost rates and higher inflation becomes a reality for some time, Carlyle Group Inc. co-founder David Rubenstein said.

“We’re due for a correction,” Rubenstein said Tuesday in an interview with Sonali Basak at the Bloomberg Year Ahead Summit in New York. “The markets have been very ebullient for quite some time. We’ve basically been having free money.”

Rubenstein said the U.S. economy is “generally in good shape,” but with the Fed signaling four to five rate hikes this year, downward pressure on asset prices is inevitable.

“The market is anticipating that,” said Rubenstein, who also has a show on Bloomberg Television. “But until it happens, I don’t think the the market will actually correct.”

A correction is generally agreed to be a 10% to 20% drop in value from a recent peak. The S&P 500 has fallen almost 4.5% from its high on Jan. 3, while the technology-heavy Nasdaq Index has slid 6.5% since the first of the year.

Rubenstein said inflation should normalize at 3% to 4% this year, “but that’s still double what we’ve had and a lot of people are nervous about it.”

“Inflation will be a cost that we’re going to have to live with,” said Rubenstein, a billionaire who founded Washington-based alternative-asset firm Carlyle after working for President Jimmy Carter.

“It won’t be quite as bad as it was in the ‘70s, but it’s not going to be 2% for a while,” he said. “I think this will be with us as long as we have Covid and the supply-chain problems.”

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