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Wednesday, January 28, 2015

Jeffrey Gundlach says the Federal Reserve is on the brink of making a big mistake.

http://www.bloomberg.com/news/articles/2015-01-28/gundlach-sees-fed-bungling-exit-then-backtracking-with-new-cut

Jeffrey Gundlach says the Federal Reserve is on the brink of making a big mistake.

U.S. central bankers have been talking about raising benchmark borrowing costs this year even though the outlook for global growth is worsening as oil prices tumble. If Fed Chair Janet Yellen goes ahead with this plan, she runs the risk of having to quickly reverse course and cut interest rates, according to Gundlach.

“There’s no fundamental reason to raise interest rates,” Gundlach, chief executive officer at DoubleLine Capital LP, said at a conference yesterday in Hollywood, Florida. “My idea is the Fed raises rates for philosophical reasons. That may be short-lived.”

..

Despite this backdrop, most analysts expect central bankers to go through with some sort of tightening this year. Money-market derivatives traders are pricing in a rate increase in the fourth quarter, too.

“This is the triumph of hope over experience,” Gundlach said.

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