Carl Icahn says the Fed needs to focus on battling the 'disease of inflation' despite SVB's failure

• Billionaire investor Carl Icahn has urged the Fed to keep fighting the "disease of inflation".
• Some traders expect the central bank to ease up on its rate hikes after SVB's collapse.

Billionaire investor Carl Icahn has urged the Federal Reserve to press ahead with its battle against inflation despite the turmoil caused by Silicon Valley Bank's recent failure.

"I think you have to stamp out the disease of inflation," he told the Financial Times in an interview published Thursday.

Federal Reserve chair Jerome Powell is completely right, Icahn added, referring to Powell's focus on bringing down soaring prices.

"And I hope he doesn't decide that they need to change course because of what is going on," he said.

Investors have trimmed their view of how much the US central bank will raise interest rates at its meeting next week, according to CME Group's Fedwatch tool. But a huge majority still expect the Fed to lift the cost of borrowing by 25 basis points.

That's because they're expecting the Fed to ease up on its campaign to quell inflation — which is still running at 6% — to restore stability to financial markets. Investors are still wary of the aftershocks from SVB's failure last Friday.

The Producer Price Index – which measures wholesale inflation – unexpectedly fell 0.1% in February, according to data released Wednesday. But markets seemed to ignore that positive news, with investors still fretting about the health of regional banks like First Republic and Western Alliance.

Top analysts such as "The Bear Traps Report founder" Larry McDonald have predicted the Fed will have to slash borrowing costs next month to stop the spread of contagion from the California bank's collapse.

But Icahn called for the Fed to press ahead with its tightening campaign, even if it hits the US's economic growth, as shown in gross domestic product data.

"In the first-quarter ,GDP might be all right. But after that, even on a nominal basis, I think you will see GDP go down quite a bit, at least for the next year and a half," he said.

This isn't the first time the Icahn Enterprises founder has shared his view on SVB and inflation.

He told CNBC Tuesday that the Fed needs to carry on raising rates to crush inflation, despite the potential impact on the economy with investors fretting about a potential banking crisis.

"Inflation is the worst thing an economy can have, and I think people underrate that," Icahn said. "Powell really has to raise interest rates sooner or later."

Read more: Legendary investor Carl Icahn warns of more SVB-style fiascos, sounds the inflation alarm, and predicts stocks will tumble