Home Finance DoubleLine’s Gundlach says the Fed is like Mr. Magoo and focuses too much on ‘short-term thinking’

DoubleLine’s Gundlach says the Fed is like Mr. Magoo and focuses too much on ‘short-term thinking’

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DoubleLine's Gundlach says the Fed is like Mr. Magoo and focuses too much on 'short-term thinking'

Jeffrey Gundlach speaking at the 2019 SOHN Conference in New York on May 5, 2019.

Adam Jeffery | CNBC

Jeffrey Gundlach, CEO of DoubleLine Capital, believes the Federal Reserve is once again missing the bigger picture.

“The Fed is like Mr. Magoo, driving around and bumping into things. Then he became systematic and caused inflation to fall,” Gundlach said in a webcast for investors Tuesday evening. “But over the past five months we have seen an upward trend again. This has put the Fed back into short-termism, overreacting to short-term data and not being strategic.”

Gundlach, a well-known fixed income investor whose firm manages $95 billion, made the comments Wednesday before the latest reading of the consumer price index. The CPI rose by a seasonally adjusted 0.4% this month, bringing annual inflation to 2.9%

Excluding food and energy, the core CPI was slightly lighter than expected, both on a monthly and annual basis. While the numbers compare favorably to forecasts, they still show that the Fed still has work to do to achieve its 2% inflation target.

“Month-to-month CPI changes have caused the Fed to zigzag,” Gundlach said. “The market has gone from aggressively assuming Fed cuts to only one cut in 2025.”

The Fed has cut rates by a full percentage point since September, a month in which it took the unusual step of cutting rates by half a point. In December, the central bank forecast only two quarter-point interest rate cuts in 2025, fewer than the four cuts it previously predicted.

“The Fed is now in sync with the market and the market is receiving no further signals for change,” Gundlach said. “That’s consistent with the Fed slowing the change in monetary policy.”

Futures pricing continued to imply a near certainty that the Fed would remain on the sidelines at its Jan. 28-29 meeting, but was leaning more toward two quarter-point rate cuts over the year, assuming one-quarter percentage point increases, CME Group said.

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