The U.S. economy is teetering on the brink of serious downturn if the Federal Reserve doesn't pump the brakes on its rate hikes, billionaire CEO Barry Sternlicht said.

The central bank has already raised interest rates four times this year and is widely expected to hike them by 75 basis points next week in an effort to tame inflation. Earlier this week, consumer prices rose 0.1% instead of the 0.1% decline economists surveyed by Dow Jones were expecting.

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However, Sternlicht believes the Fed was late to the game and is now being too aggressive.

"The economy is breaking hard," the chairman and CEO of Starwood Capital Group told CNBC's "Squawk Box" Thursday.

"If the Fed keeps this up they are going to have a serious recession and people will lose their jobs," he added.

Consumer confidence is terrible and CEO confidence is "miserable," Sternlicht said. Supply chain issues are being resolved, and inventories are now backing up in warehouses, which will lead to huge discounting, he said.

"The CPI, the data they are looking at is old data. All they have to do is call Doug McMillan at Walmart, call any of the real estate fellas and ask what is happening to our apartment rents," he said, pointing out that the rate of rent growth is now slowing.

The continuation of rate hikes will also cause a "major crash" in the housing market, Sternlicht predicted. The once-hot real estate market is swiftly slowing down, with mortgage rates for a 30-year fixed loan over 6% — up from 3.29% at the start of the year, according to Mortgage News Daily.

While the Fed's target is 2%, inflation should run at 3% to 4%, Sternlicht said.

"Inflation that is driven by wage growth is fabulous. We should want wages to go up," he said.

"You can pay higher rents, you can buy your equipment, you can go to the restaurant if you have high wage growth."

As for when the "serious recession" will hit, Sternlicht believes it is imminent.

"I think [in the] fourth quarter. I think right now," he said. "You are going to see cracks everywhere."