The Federal Reserve should have implemented a larger interest rate increase rather than the quarter-point hike delivered on Wednesday, according to Jeff Gundlach, the prominent bond investor and founder of DoubleLine.
Speaking on CNBC’s “Closing Bell,” Gundlach stated that a half-point increase would have provided necessary market adjustment. He referenced his own investment philosophy with the phrase “stun and done,” a play on the industry term suggesting the central bank might only conduct one or two rate hikes instead of sustaining a tightening cycle.
Gundlach highlighted a significant disparity in the bond market, noting that the 2-year Treasury yield was trading more than 100 basis points above the Fed funds rate. Following the announcement, the 2-year U.S. Treasury yield climbed approximately 7 basis points during afternoon trading.
Expressing concern that the U.S. may not be taking the inflation threat seriously enough, Gundlach advocated for a 50-basis-point move followed by a wait-and-see approach based on incoming data.
The doubleLine chief also reacted to the market’s response to Federal Reserve Chairman Kevin Warsh’s post-decision press conference. The Dow Jones Industrial Average dropped roughly 700 points in late trading, with declines intensifying during Warsh’s remarks. Gundlach described the chairman’s commentary as “opaque” and “thin,” indicating he was not surprised by the sell-off.
Additionally, Gundlach voiced skepticism regarding Warsh’s initiative to form task forces to evaluate key operational aspects of the Federal Reserve. He compared the move to a struggling company hiring external consultants, suggesting that such advisors often tell management what they wish to hear rather than providing objective guidance.
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