‘Bond King’ Jeffrey Gundlach Says Incoming Rate Hike Will Be The Last

Jeffrey Gundlach – an American businessman and Founder of DoubleLine Capital – thinks the US Federal Reserve will raise interest rates by 25 basis points next week. 

According to him, this will be the last hike, believing the central bank will switch to other inflation-fighting efforts.

The End of the Fed’s Hike Policy?

In a recent interview for CNBC, Gundlach (better known as the “Bond King”) predicted that the Federal Reserve will impose a small rate hike on March 22 amid the ongoing banking crisis in the US. 

“I just think that, at this point, the Fed is not going to go 50. To save the central bank’s credibility, they’ll probably raise rates by 25 basis points. I would think that that would be the last increase.”

The collapses of major American banks, including Silicon Valley Bank and Signature Bank, has infused panic among local investors and consumers who started wondering how the Fed would react to that catastrophe. Gundlach believes the institution will stop raising interest rates (sooner than some forecasted) and focus on other tools to combat inflation.

“This is really throwing a wrench in [Fed Chair] Jay Powell’s game plan,” he added.

According to a CME Group estimate, most traders see the Federal Reserve announcing a 0.25% interest rate increase, while less than 15% think there will be no changes. 

Others, like SkyBridge Capital’s Founder – Anthony Scaramucci – previously opined that the central bank will cease the rate hikes once US inflation decreases to 4-5%. The latest CPI numbers clocked in at 6% YoY which met previous expectations and propelled a mini-bull run for the crypto market. Bitcoin spiked yesterday to nearly $26,500 (CoinGecko data), a level unseen since June last year. 

Gundlach’s Pessimistic View on BTC

The American shared his stance last summer, saying the condition of the cryptocurrency market did not seem “positive.” He expected the negative trend to intensify and eventually trigger a decline for BTC to $10,000:

“It looks like it’s being liquidated, so I’m not bullish at $20,000 or $21,000 on bitcoin, I wouldn’t be surprised at all if it went to $10,000.”

Despite its unsatisfactory price performance in the following months (compared to the 2021 valuations), the primary cryptocurrency never hit the forecasted level, dropping to as low as $15,700 amid the FTX crisis in November. 

With the start of the new year, it headed north and is currently approximately 50% up since the figures registered on New Year’s Eve.