'Bond King' Jeff Gundlach says the Fed's devotion to big rate hikes means there's now a 75% chance of a US recession next year

Jeffrey Gundlach, wearing a lime green shirt and tan pants, speaks at the Future Proof festival in Huntington Beach, California
Billionaire "bond kind" Jeffrey GundlachCourtesy of Advisor Circle
  • "Bond King" Jeff Gundlach said the Federal Reserve should slow its pace of interest-rate hikes.

  • Its policy means the odds of a US recession in 2023 are now 75%, the billionaire investor said.

  • The US central bank raised rates by 75 basis points Wednesday and signaled more hikes are imminent.

DoubleLine Capital CEO Jeff Gundlach believes the Federal Reserve's commitment to cooling inflation means there's now a 75% chance of its aggressive interest-rate hikes pushing the US economy into recession.

The US central bank raised interest rates by 75 basis points Wednesday for the third time in a row, as it tries to cool the four decades-high inflation rippling through the economy. The hike is three times bigger than the Fed's typical rate rise and extends a streak of fast-paced increases.

"The Fed should've done more earlier. The monetary policy has lags that are long and variable." Gundlach told CNBC on Wednesday.

"But we've been tightening now for a while. And the impact of these tightenings is going to cumulate into a recession," he added.

"I do think the Fed should be slowing down on these rate hikes."

Gundlach, nicknamed the 'Bond King' for his successful career in fixed income, has long warned the Fed's sharp interest rate rises are likely to dent the economy and tip it into recession.

"I do think the unemployment rate is going to go up, and I do think we're headed to a recession, and I think the Fed should have pasted this differently," Gundlach told CNBC.

"But now they're so committed to this 2% that I think the odds of a recession in 2023 are very high. I mean, I would put them at 75%."

The Fed is trying to get inflation to its target of 2% by lifting interest rates to discourage borrowing and dampen demand, which in turn puts pressure on prices. The US inflation rate cooled slightly in August to 8.3% year-on-year, but outstripped economists' expectations for an 8.1% print.

The September hike is three times bigger than its typical rate rise and extends a streak of fast-paced increases. It brings the fed funds target rate to between 3.0% and 3.25%.

The Fed expects the target rate to be just under 4.5% at year-end, according to its so-called dot plot of forecasts. That means policymakers could make another 75-basis-point hike at November's meeting, followed by a 50-basis-point rise in December.

Read the original article on Business Insider