Jeffrey Gundlach is not a fan of the Fed's current monetary policy, which preliminarily includes eight interest rate hikes over the next two years.
Speaking Monday at the Inside ETF conference in Hollywood, Fla., the founder of DoubleLine Capital compared the Fed's quarter-point rate hike last month to the conclusion of last year's Super Bowl, when Seattle Seahawk's coach Pete Carroll called for the ill-fated pass play when one of the league's best running backs was in the backfield.
Mr. Gundlach criticized Fed Chair Janet Yellen for “raising rates for absolutely no good reason at all.”
A vocal critic of not only the Fed's decision to raise rates, but also sticking with a message that suggests more rate hikes are on the way, Mr. Gundlach challenged the Fed for going against the grain of every other central banker in the world.
“It's no surprise that markets around the world have been collapsing,” he said. “The Fed has got to dial this rhetoric back, but they just keep talking heroically about raising rates, which ignores the path of central banks around the world.”
STRIDENT
He cited a pattern of rate hikes by various central bankers in 2011, many of which have since been cut. Mr. Gundlach believes the
Federal Reserve is potentially on the same path.
“The Fed is strident in its path to raise rates,” he said. “They are saying they're going to raise rates 100 basis points in 2016, and the market is having none of it.”
Citing the economic growth of the U.S., compared to economies where central bankers are now cutting rates, Mr. Gundlach said, “You have to ask what the contrast is that they're seeing because the difference between us and those economies is almost non-existent.”
Considering the idea that higher rates are typically used to fend off inflation, Mr. Gundlach said the Fed “must think there's some massive inflation problem, but the bond market is saying inflation is falling over the long-term horizon.”
He added that the Fed has never raised interest rates with nominal GDP as low as it is now.
