Billionaire ‘Bond King’ Jeffrey Gundlach expects Fed to hike rates next week – ‘That would be the last hike’ – Economics

Billionaire Jeffrey Gundlach, also known as “Bond King,” expects the Federal Reserve to hike interest rates at its March meeting next week, which “would be the last hike,” he said. Gundlach also warned: “Inflationary policy is back in play at the Federal Reserve.”

Doubleline CEO Jeffrey Gundlach on Fed rate hikes

Jeffrey Gundlach, chief executive and chief investment officer of investment management firm Doubleline, shared his expectations for a rate hike by the Fed in an interview with CNBC on Monday. Gundlach is nicknamed “The Bond King” after appearing on the cover of Barron’s in 2011 as “The New Bond King”. According to Forbes, his net worth is currently $2.2 billion.

After the collapse of Silicon Valley Bank and Signature Bank, many economists revised their rate hike forecasts. Global investment bank Goldman Sachs, for example, no longer expects the Fed to hike rates in March.

Regarding whether the Federal Reserve will hike interest rates at its next Federal Open Market Committee (FOMC) meeting next week, Gundlach said, “I just think the Fed isn’t going to go to 50 at this point [basis points]. I would say 25.” He elaborated:

To save the program and their credibility, they will likely hike rates by 25 basis points. I think that would be the last increase.

Noting that the Silicon Valley bank fallout “really puts a wrench in the game [Fed Chair] Jay Powell’s game plan,” the manager emphasized: “I wouldn’t do it myself. But what do you do in connection with all this news that’s happened in the last six months and then something happens that you think you’ve solved.”

On Sunday, the Treasury Department, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) announced a plan to support depositors at the failed Silicon Valley Bank and Signature Bank. The Treasury will provide up to $25 billion from its FX Stabilization Fund to cover anticipated losses from the funding program. The Federal Reserve also announced that it will extend loans for up to a year to companies hit by the bank failures.

While Gundlach was expecting a rate hike in March, he acknowledged the possibility that the Fed might not hike rates, noting that the market is currently pricing that possibility as “some kind of rate hike coin flip.”

Gundlach also reiterated his warning of an impending recession, citing the dramatic steepening of the government bond yield curve that generally precedes an economic downturn. The billionaire noted that “in all past recessions going back decades, the yield curve starts to de-invert a few months before the recession hits,” the billionaire said:

I think inflationary policy is back at play with the Federal Reserve…putting money into the system through this lending program.

Do you agree with Jeffrey Gundlach? Let us know in the comment section below.

Kevin Helms

As a student of Austrian economics, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the interface between economics and cryptography.

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