Zinger Key Points
- Jeffrey Gundlach notes that the Federal Reserve has kept rates unchanged through four of its last five meetings.
- "The headline CPI could be 2.4 in June. If that's the case, I think the Fed cuts rates," Gundlach says.
The Federal Reserve held interest rates steady on Wednesday and signaled three possible rate cuts in 2024. Following the Fed's decision on rates, Doubleline Capital CEO Jeffrey Gundlach flagged the forecast as "pretty dovish."
What Happened: In its final meeting of the year, the Fed opted to leave interest rates unchanged, which was in line with expectations, but commentary from Fed Chair Jerome Powell sent stocks racing higher Wednesday afternoon.
We are "likely at or near the peak of this tightening cycle," Powell said, setting the stage for potential rate cuts in 2024.
In an interview on CNBC's "Closing Bell" following the Fed decision, Gundlach said the Fed Chair sounded "pretty dovish" and noted that the Fed has kept rates unchanged through four of its last five meetings.
Still, Doubleline sees a path to rate cuts as the firm expects the shelter component of the Consumer Price Index (CPI) to come down in the near future, bringing CPI below 3%, Gundlach said.
"Our CPI model suggests that we are only going to get one more month of a three-handle CPI year-over-year, and that it's quite possible, at this point, that the headline CPI could be 2.4 in June. If that's the case, I think the Fed cuts rates," he said.
Related News: Janet Yellen Anticipates Soft Landing, Sees Inflation Trending Lower Toward Fed's 2% Goal In 2024
Looking into 2024, the billionaire investor anticipates a recession and expects the yield curve to de-invert in the first half of the year.
"I would guess that we see the 10-Year Treasury yield in the low three's sometime next year," Gundlach said.
"There’s something about if you break below four on the 10-year that I think it almost sounds like a fire alarm going off relative to the economy."
The 10-Year Treasury yield reached its lowest level since August after the Fed kept rates unchanged for the third straight meeting and set the stage for a series of interest rate cuts next year.
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