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‘Bond King’ Jeffrey Gundlach says the inflation threat is fading fast – and the Fed should end its interest-rate hikes now

jeff gundlachJeffrey Gundlach, CEO of DoubleLine Capital, speaks during the Sohn Investment Conference in New York City, U.S., May 8, 2017.

Brendan McDermid/Reuters

  • Billionaire investor Jeffrey Gundlach thinks the threat of inflation is quickly receding.
  • He urged the Fed to stop hiking rates after Wednesday’s move as there’s been progress on inflation. 
  • The Fed isn’t being transparent about its inflation target, Gundlach added, which he believes is “more like 3% now”. 

Billionaire investor Jeffrey Gundlach urged the Federal Reserve to halt its interest-rate increases, saying the inflation threat is rapidly fading out. 

“I think there has been some progress on inflation,” the DoubleLine Capital CEO said during a Wednesday CNBC interview. “Nobody’s really talking about all of these runaway price increases anymore. With the economy weakening, I think the inflation rate is going to fall faster than most economists do,” he added. 

Gundlach’s comments come after the Fed delivered an interest-rate hike of 50 basis-points Wednesday as part of its continued efforts to cool inflation toward the 2% official target, down from 7.1% in November. The central bank has boosted its benchmark rate by 425 basis points this year to 4.25%-4.5%, the highest level since 2007.

The latest Fed median projections suggest officials will lift rates to 5.125% by the end of 2023, dashing any investor hope that the institution will pivot from its aggressive policy amid growing recession risks. Gundlach pointed to an inverted yield curve in the bond market as a flashing sign of an oncoming economic downturn. 

“I think they should not do any more hikes after today,” Gundlach said.

In Gundlach’s view, the Fed isn’t being transparent about its inflation target, saying he doesn’t think the central bank actually wants to drive it down to 2%.

“I secretly believe the Fed’s inflation target is more like 3% now. If we get down to 2%, I don’t see any way it’s going to stop there. It would just be so much momentum to the downside […] that I just don’t know if they really want to go that far,” he said.

“They just don’t always articulate the moving of the target because that makes them look weak, it makes them look indecisive,” he continued.

He also stated the Fed will be “highly encouraged” by positive inflation data over the next six months, and predicted the pace of price increases will fall to 4.1% by next June.

Read the original article on Business Insider