The Federal Reserve has likely tightened policy for the final time in this cycle, according to Jeff Gundlach. “The Fed will not raise rates again,” the DoubleLine Capital CEO said late Thursday. Chair Jerome Powell signaled after the central bank’s meeting this week that it could have delivered its final rate hike. Loading Something is loading.
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The Federal Reserve has likely raised interest rates for the final time in the current monetary-tightening cycle, according to billionaire bond investor Jeff Gundlach.
“The Fed will not raise rates again,” the DoubleLine Capital CEO said on Twitter late Thursday.
Gundlach’s assertion came after the central bank lifted borrowing costs for the 10th time in a row Wednesday at the conclusion of its May meeting.
The Fed has raised rates from near-zero to over 5% over the past 14 months in a bid to tame inflation – which this year has finally started cooling from four-decade highs.
Policymakers indicated Wednesday that a pause in tightening could be on the table at the Fed’s next meeting in mid-June.
In its communique this week, the central bank scrapped its previous guidance that “some additional policy firming may be appropriate” to tame inflation – and its chair Jerome Powell called the change in language “meaningful” at a post-decision press conference.
With inflation now falling toward the Fed’s 2% target, many analysts expect policymakers’ focus to shift toward stabilizing the struggling US regional banking sector by ending its tightening campaign.
Silicon Valley Bank collapsed in March after the Fed’s aggressive rate hikes led to massive losses on its bond portfolio – and customers have responded to its failure by yanking their deposits from other similar-sized lenders.
“In light of these uncertain headwinds, along with monetary policy restraint we put in place, our future policy actions will depend on how events unfold,” Powell said.
Gundlach had said the day before his Thursday night Tweet that the Fed needed to start slashing benchmark rates from their current 5% level to stop the bank runs.
“Deposits are going to keep drifting out, I don’t think that this is the last chapter in this regional banking problem… I don’t really see what’s gonna make it stop unless the Fed cuts interest rates,” he told CNBC’s “Closing Bell”.
Read more: The banking crisis will only end once the Fed starts slashing interest rates, Jeff Gundlach warns