The Federal Reserve should have hiked rates by more on Wednesday instead of a just a quarter point, according to Jeff Gundlach, founder of DoubleLine.
“I would have called that stun and done,” Gundlach said Wednesday on CNBC’s “Closing Bell,” a play on the term “one and done” referring to the belief by some that the Fed may only do one or two hikes instead of embarking on a tightening cycle.
Gundlach, one of the most prominent bond investors, said a half-point hike would have provided the market with a “truing up” to the Fed funds rates.
The 2-year Treasury rate was more than 100 basis points above the Fed funds rate, according to Gundlach. The yield on the 2-year U.S. Treasury, which tracks short-term Fed interest rate expectations, climbed around 7 basis points in Wednesday afternoon trading.
Gundlach said he worries that the inflation problem facing the U.S. may not be “fully respected.”
“I would have just done the 50 and then see what the data does,” Gundlach said.
2-year Treasury, 1-day
To be sure, Gundlach said he has previously advocated for larger rate hikes than the Fed has implemented. He said the 2-year Treasury “leads” the Fed, a hypothesis that the investor said was proven correct on Wednesday.
Gundlach said he wasn’t surprised to see stocks take a leg down during Federal Reserve Chairman Kevin Warsh’s post-decision press conference. The Dow Jones Industrial Average fell 700 points in late afternoon trading, with losses accelerating during and in the aftermath of Warsh’s gathering.
“I thought the content was pretty thin,” Gundlach said of Warsh’s press conference, later adding that the central bank chief was “opaque.”
Gundlach also said he didn’t approve of Warsh’s push to bring task forces in to evaluate several key aspects on the Fed’s operation.
“It’s like a company that’s having trouble that wants to hire consultants,” Gundlach said. “The consultants always want to figure out what the … people at the company really want to hear, and then they tell them what they want to hear.”
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