On May 17, Gundlach appeared on Fox News' 'Sunday Morning Futures,' stating, "Inflation pressures are persisting, making it difficult for the Fed to lower interest rates." He noted that Kevin Warsh, who has been nominated as the next Fed chair, will face a challenging environment, adding, "The Fed's next policy direction may not be a cut but rather an increase."
Gundlach expressed particular concern that inflation is not decreasing as quickly as the market anticipates. He pointed out that movements in the two-year U.S. Treasury yield are undermining expectations for rate cuts, stating, "It is hard to justify a rate cut." He also predicted that the next Consumer Price Index (CPI) could rise to around 4%.
In a previous interview with CNBC, Gundlach reiterated similar concerns. According to DoubleLine, he warned that if rising oil prices and tariff impacts do not dissipate easily, the CPI, including food and energy, could enter the 4% range in the short term. He emphasized, "In this environment, a rate cut by the Fed is virtually impossible," and added that the likelihood of an increase is higher than a cut by the end of the year.
Market expectations are also shifting rapidly. According to Reuters, Bank of America (BofA) has revised its forecast, predicting that the Fed will keep rates steady for the remainder of the year, with the first cut expected in July or September 2027. Goldman Sachs has also pushed back its forecast for the first cut from September 2026 to December 2026. Reuters reported that the prolonged conflict in the Middle East is driving up energy prices, prompting global investment banks to reassess their outlook for U.S. rate cuts.
The Fed held interest rates steady during its Federal Open Market Committee (FOMC) meeting on April 29, with a vote of 8 in favor and 4 against, marking the closest decision since 1992. With U.S. inflation still above the Fed's target of 2%, the market reflects a likelihood that the Fed will maintain rates at the current level of 3.50% to 3.75% through the end of the year.
Gundlach's comments also serve as a warning regarding the pricing of risk assets. He cautioned that investors buying stocks and other risk assets based on expectations of rate cuts may be making a miscalculation. According to Business Insider, Gundlach stated, "There will be no rate cuts this year," urging an increase in defensive asset allocations such as cash, gold, and commodities.
* This article has been translated by AI.
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