DoubleLine’s Gundlach predicts Fed to quick rate cut, half-point reduction on Wednesday
DoubleLine Capital CEO Jeffrey Gundlach has called for the Federal Reserve to quickly ease policy in response to the current economic slowdown. Gundlach suggested a half-point interest-rate reduction, emphasizing the need for a swift response based on the performance of the two-year Treasury. He stated that a 150 basis point cut is necessary, with expectations of a 50 basis point reduction at the upcoming Fed policy meeting.
Market indicators are currently predicting a 60% chance of a 50 basis point rate cut, a change from the previous consensus of a quarter-point reduction. The Fed’s benchmark overnight lending rate is currently at 5.25% to 5.50%, while the 2-year Treasury yield is around 3.59%. The debate around the size of the rate cut revolves around potential impacts on earnings growth and concerns about the economy’s health amid signs of weakness.
Gundlach also expressed concerns about a potential deflationary situation, citing factors such as oil prices, broader price trends, and impending layoffs. He warned that the Fed needs to act promptly to address these issues. Recent Inflation data has shown a decrease in price pressures compared to previous years.
Regarding the state of the economy, Gundlach maintained his stance that the U.S. is currently in a recession. He highlighted the significance of the yield curve inversion, noting its historical relevance as a recession predictor. The recent un-inversion of the yield curve has raised flags for Gundlach, pointing towards a potential economic downturn.
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Emily Jensen, graduated from the London School of Economics and Political Science (LSE) in the UK in 2015 with a degree in Economics. She specializes in financial markets and international trade. After graduating, she worked as an analyst at an investment bank in London, where she developed expertise in global economic trends. She later transitioned into consulting, focusing on fintech ventures and providing insights into global economic developments. Emily is passionate about the intersection of finance and technology and aims to drive innovation in the financial sector.