Billionaire ‘Bond King’ Jeffrey Gundlach Expects Fed to Raise Rates Next Week — ‘That Would Be the Last Increase’

Billionaire Jeffrey Gandlach, also known as the “King of the Bonds,” expects the Federal Reserve to raise interest rates at its March meeting next week in what “will be the final hike,” he said. In addition, Gundlach warned: “The Federal Reserve is playing inflationary politics again.”

Doubleline CEO Jeffrey Gandlach on Fed rate hike

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

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

As to whether the Federal Reserve will raise interest rates at its next Federal Open Market Committee (FOMC) meeting next week, Gundlach said: [basis points]. I would say 25.” He elaborated:

To save the program and their credibility, they are likely to raise rates by 25 basis points. I think this will be the last upgrade.

While noting that the effects of the Silicon Valley bank are “really [Fed Chair] Jay Powell’s game plan,” said the CEO. “I wouldn’t do it myself. But what are you doing in the context of all these messages that have happened in the last six months and then something happens that you think you have decided?

On Sunday, the Treasury Department, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) unveiled a plan to bail out depositors of bankrupt Silicon Valley Bank and Signature Bank. The Treasury Department will provide up to $25 billion from its exchange-traded stabilization fund to cover any anticipated losses from the funding program. The Federal Reserve also announced that it would provide loans for up to one year to organizations affected by a bank failure.

Expecting a rate hike in March, Gundlach acknowledged the possibility that the Fed might not raise rates, noting that the market is currently treating the possibility as “kind of a coin toss.”

Gundlach also reiterated his warning about a coming recession, citing the sharp increase in the Treasury yield curve that usually precedes an economic downturn. Noting that “in all past recessions that lasted decades, the yield curve began to deinvert a few months before the onset of a recession,” the billionaire opined:

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

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