The Fed’s decision to hold rates at its target range of 5.25% to 5.50% was one of the central bank’s best decisions in a while, DoubleLine Capital’s Jeffrey Gundlach told CNBC in an interview following the Federal Open Market Committee’s post-meeting statement.
(Bloomberg) — The Fed’s decision to hold rates at its target range of 5.25% to 5.50% was one of the central bank’s best decisions in a while, DoubleLine Capital’s Jeffrey Gundlach told CNBC in an interview following the Federal Open Market Committee’s post-meeting statement.
“I think he’s right about all of this,” Gundlach said about Fed Chair Jerome Powell, adding that the US economy is facing cross-currents, including an increase in debt attributed to high prices.
Data used by the Fed is unreliable and distorted by events such as the federal student loans restart, auto-workers strikes as well as inflation, Gundlach said. Given these factors, it makes sense for the Fed to be prudent and adopt a wait-and-see attitude, he added.
Read More: Fed Leaves Rates Unchanged, Signals Another Hike This Year
Rising oil prices are also boosting the chances of an additional rate hike as it will nudge consumer price index (CPI) readings higher, Gundlach said.
“It will be problematic,” he said. “We know that the base effects and roll off of the CPI is going to lead to inflation going back up and kind of staying where it is now in a sticky way.”
With the unemployment rate possibly crossing over the three-year moving average in the first quarter of 2024 and other headwinds, including the risk of a government shutdown, the economy could slow down in the next four to six months, he said.
That scenario would position bonds as an ideal investment.
“I think Treasury bonds are attractive, not for the long term, more for the short term,” he said.
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