The Fed is doing "what the bond market says -
with a lag," said Gundlach, who oversees more than $130 billion
in assets. "The bond market definitely helped to encourage the
'Fed pivot.'"
The Fed on Wednesday signaled it could cut interest rates by as
much as half a percentage point over the remainder of this year,
as it responded to increased economic uncertainty and a drop in
expected inflation. The U.S. central bank's next policy meeting
will be held in July, with the following meeting in September.
In a telephone interview with Reuters, Gundlach said economic
data would have to be weak for the Fed to slash rates in July.
If policymakers do cut rates next month, “They are basically
admitting they are behind the curve,” he said.
Federal funds futures implied traders were fully pricing in the
U.S. central bank lowering rates at the July 30-31 policy
meeting.
“The only way they cut is if the data is sustaining a negative
tone and that we have sustained economic weakness," Gundlach
said.
"One interest rate cut is not going to forestall recession," he
added. "It increases the chances that we are headed into
recession.”
(Reporting by Jennifer Ablan; Editing by Leslie Adler)
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