Jeffrey Gundlach speaks at the 2019 SOHN Conference in New York City on May 5, 2019.
Adam Jeffery | CNBC
CEO of Double Line Capital Jeffrey Gundlach I believe the Fed has once again ignored the bigger picture.
“The Fed looks like Mr. Magoo driving around and then getting systematic and getting inflation down,” Gundlach said on an investor webcast late Tuesday. “But over the past five months, we’ve had another uptrend. That’s brought the Fed back into short-termism, overreacting to short-term data and being unstrategic.”
Gundlach, a prominent fixed-income investor whose firm manages $95 billion in assets, has made the comments before Latest consumer price index readings Wednesday. After seasonally adjusting, CPI rose by 0.4% this month, and the 12-month inflation rate was 2.9%
Excluding food and energy, both the monthly and annual core CPI rates were slightly lower than expected. While these numbers compare favorably to forecasts, they still suggest the Fed has a lot of work to do to achieve its 2% inflation target.
“The month-to-month changes in the consumer price index have given the Fed a zigzag,” Gundlach said. “The market has gone from aggressive assumptions about a rate cut by the Fed to just one rate cut in 2025.”
Fed has lowered the benchmark interest rate by a full percentage point The index took the unusual step of falling by half a percentage point since September. In December, the central bank projected just two 25-basis-point interest rate cuts in 2025, down from its previous forecast of four cuts.
“The Fed is now in sync with the market, and the market is not receiving further signals of change,” Gundlach said. “This is consistent with the Fed slowing down the pace of monetary policy changes.”
CME Group said that futures pricing continues to imply that the Federal Reserve will keep interest rates unchanged at its meeting on January 28-29, but prefers to cut interest rates twice throughout the year, assuming a rate cut of 25 percentage points.
