‘Bond King’ Gundlach: “The Fed Should Have Raised Rates by 0.5 Percentage Points”... “Inflation Risk Is Being Underestimated”

[Financial News] Jeffrey Gundlach, CEO of DoubleLine Capital and an influential bond investor on Wall Street, said on the 16th (local time) that the Federal Reserve System (Fed)’s decision to raise its benchmark interest rate by 0.25 percentage points failed to adequately reflect the seriousness of inflationary pressures.
In an interview with CNBC that day, Gundlach said the Fed should have raised its benchmark interest rate by 0.50 percentage points instead of 0.25 percentage points.
Referring to a “stun and done” approach, he criticized the Fed for failing to make its tightening stance clear through one bold shock and adjust market expectations.
“It should have implemented just 50 basis points (1 bp = 0.01 percentage points) and watched how the data came in,” he said, emphasizing the need for a preemptive and forceful response.
He also pointed out that the inflation problem in the United States is still “not being taken seriously enough.”
Gundlach also criticized Fed Chair Kevin Warsh’s press conference as “quite poor,” saying the central bank chief’s explanation was “ambiguous.”
Regarding moves such as Warsh’s plan to form an external task force to improve the efficiency of the Fed’s operations, he said, “It’s like a company in financial trouble trying to hire consultants.”
“Consultants always figure out what the people at the company really want to hear and then tell them exactly what they want to hear,” he said, indirectly criticizing the Fed’s communication style and leadership.
U.S. Treasury yields rose following the Fed’s rate hike and Warsh’s press conference that day.
The yield on United States Treasury securities (U.S. Treasuries), a global benchmark for interest rates, stood at 5.025% as of 5 p.m. that day, up 2.9 basis points (1 bp = 0.01 percentage points) from the previous session.
The yield on two-year U.S. Treasuries, which are sensitive to monetary policy, rose 7.7 basis points to 3.868%.
The yield on 30-year U.S. Treasuries was unchanged at 5.363%.
Because bond yields and bond prices move in opposite directions, a rise in Treasury yields means that prices have fallen.

[email protected] Lee Seok-woo, International Affairs Correspondent Reporter