Billionaire investor Jeff Gundlach warns US inflation could hit 10% this year — and says the Fed has done a terrible job in fighting it
- "Bond King" Jeff Gundlach warned US inflation could hit 10% sometime this year.
- "They've done a terrible job of it so far," he said about the Fed's fight against red-hot inflation rates.
Billionaire investor Jeff Gundlach has predicted consumer prices are set to go even higher, and warned that US inflation may hit 10% this year.
He said that level of inflation would underline the need for the Federal Reserve to aggressively tighten monetary policy to try to support the economy, according to a Bloomberg report.
"Their job is to fight inflation," the DoubleLine Capital CEO said about the Fed in a web presentation Tuesday.
"They've done a terrible job of it so far," he said.
The US Consumer Price Index – a commonly used measure of US inflation — hit 7.5% in January, a 40-year high. The rate of price rises has surged thanks to disruptions to supply chains around the world, and to pent-up consumer demand for goods that emerged when economies reopened in 2021.
The Fed is poised to start raising interest rates this month, after holding them at record lows during the coronavirus pandemic, which took hold in early 2020.
Gundlach — whose nickname is the "Bond King" — said he expects the Fed to raise rates by a quarter of a point at its next meeting, scheduled for Tuesday and Wednesday next week. Policymakers are expected to hike rates for the first time in three years.
CPI inflation will reach at least 9% before hitting a peak, Gundlach believes. He predicts it will then fall back to 7.5% by the end of the year, as surging prices lead to demand destruction, with food and energy accounting for major chunks of household budgets.
The DoubleLine boss described the US economic outlook as "substantially worse" now, compared with September. But he reiterated that he is long-term bullish on the dollar.
Gundlach suggested selling US equities and buying stocks in emerging markets instead, predicting an "insanely high" budget deficit. "We're definitely getting more concerned" about the possibility of a recession, he said.
In a separate interview this week, Gundlach shared another dire price prediction. He warned oil prices could surge to $200 a barrel, from current levels of around $130.