Jeff Gundlach Questions Federal Reserve’s Inaction on Interest Rates
- Jeff Gundlach criticized the Federal Reserve for delaying further interest rate hikes.
- Gundlach believes the Fed is lagging as the economy shows signs of strength.
- The upcoming December meeting has an 85% chance of a rate increase, according to market tools.
DoubleLine founder Jeff Gundlach expressed concerns on CNBC’s “Closing Bell” regarding the Federal Reserve’s delay in raising interest rates. He questioned, “What are you waiting for? You just upgraded the economy right here,” referring to Fed Chairman Kevin Warsh’s remarks about a strong macroeconomic environment from the central bank’s post-decision press conference.
Gundlach’s comments followed the Fed’s decision to leave interest rates unchanged during its October meeting. Previously, after the Fed raised rates by 25 basis points in September, Gundlach stated that a larger increase of 50 basis points was warranted instead of a gradual approach.
“I just think that the Fed is a little bit behind the curve right now,” he noted. He emphasized that the current overnight rate of 3.75%-4% is notably lower than the 2-year Treasury yield, which is trading around 4.7%, suggesting the need for more aggressive rate hikes.
Despite the Fed maintaining steady rates, the CME’s FedWatch tool indicates an 85% likelihood of a 25 basis point increase at the Fed’s December meeting. The Fed stated it will rely on further data to guide its policy in pursuit of its 2% inflation goal, while Warsh reiterated that future policy decisions are not currently determinable.
“Absent a crack in the oil price, I think they have to hike in December,” Gundlach remarked, noting that U.S. oil prices remained above $100 per barrel on Wednesday.
Following the Fed’s decision, Gundlach confirmed that his investment strategy remains unchanged, with 30% of his portfolio in equities—favoring the equal-weight S&P 500 to mitigate potential exposure to artificial intelligence concerns. Additionally, he allocates 30% to bonds, 20% to commodities, and 20% to “dry powder.”
During the recent meeting, Warsh announced that one meeting in 2027 and two in 2028 will focus exclusively on policy strategy without voting on the fed funds rate. Gundlach commented on this decision, expressing support for reducing the number of rate-setting meetings from eight to six.
“I don’t think eight meetings is really necessary,” he stated. “It seems like they come up really quickly … at least you have a couple months worth of data to filter in.”
News Courtesy of CNBC
