Gundlach: The Fed Should Raise Rates by 50 Basis Points, Not 25
nashnova research
DoubleLine Capital founder Jeffrey Gundlach criticized the Fed's 25-basis-point hike, arguing a 50 bp move was needed to align the policy rate with market rates — and warned that U.S. inflation risks remain underappreciated.
Why does Gundlach think 25 basis points fell short?
Gundlach pointed to a clear disconnect: the 2-year Treasury yield already sits more than 100 bp above the fed funds rate.
This means → the market has been pricing in far more tightening than the Fed has actually delivered.
He called for a straight 50 bp hike to achieve what he termed a "true calibration" between the policy rate and market rates — then let the data guide next steps.
"Stun and done" — what does that mean?
Gundlach dubbed the 25 bp decision "stun and done," a play on the market phrase "one and done."
In plain terms = he believes the Fed may intend just one or two hikes before stopping — far too little in his view.
His reasoning: the 2-year Treasury has historically been a leading indicator of Fed policy direction, and this decision confirmed that pattern once again.
What else is Gundlach worried about?
He warned that U.S. inflation may not be getting "sufficient attention."
This means → in his view, inflation is stickier than the market expects, and under-hiking risks letting price pressures persist longer.
How did he assess Fed Chair Warsh's press conference?
After the decision, the Dow Jones Industrial Average fell 700 points. Gundlach said he was not surprised.
He called Warsh's press conference "pretty thin on substance" and his messaging "not transparent enough."
Gundlach also criticized Warsh's push to form multiple working groups reviewing Fed operations, comparing it to "a troubled company hiring consultants — consultants always try to figure out what the people inside really want to hear, then tell them exactly that."
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