Jeff Gundlach says the Fed should have hiked rates by more to fight rising inflation

• Gundlach advocated for a 50 basis point hike as a 'stun and done' approach to bring Fed funds rate in line with market expectations reflected in the 2-year Treasury yield
• He expressed concern that the Fed's gradual approach may be insufficient to combat rising inflation, suggesting a larger immediate hike followed by a data-dependent pause
• Gundlach criticized Fed Chairman Warsh's press conference as 'thin' and 'opaque,' and disapproved of bringing in consultants to evaluate the Fed's operations

Summary

Key Position: Jeff Gundlach, founder of DoubleLine Capital and prominent bond investor, criticized the Federal Reserve's decision to raise interest rates by only 25 basis points, arguing they should have implemented a 50 basis point hike instead.

Main Argument: Gundlach dubbed his preferred approach "stun and done"—a play on "one and done"—suggesting a larger half-point increase would have provided the market with a necessary "truing up" to Fed funds rates. He noted the 2-year Treasury yield was trading more than 100 basis points above the Fed funds rate at the time, with the 2-year Treasury yield at 4.725% in afternoon trading.

Inflation Concerns: The DoubleLine founder expressed worry that the U.S. inflation problem may not be "fully respected" by policymakers. He advocated for the Fed to "just do the 50 and then see what the data does," emphasizing his preference for more aggressive action.

Market Reaction: Markets responded negatively to Fed Chairman Kevin Warsh's post-decision press conference, with the Dow Jones falling 700 points in late afternoon trading, with losses accelerating during and after the conference.

Additional Criticism: Gundlach described Warsh's press conference content as "pretty thin" and the chairman as "opaque." He also disapproved of Warsh's decision to bring in consultants to evaluate Fed operations, comparing it unfavorably to troubled companies hiring consultants who "tell them what they want to hear."

Historical Context: Gundlach noted he has consistently advocated for larger rate hikes than the Fed has implemented, and reiterated his view that the 2-year Treasury "leads" the Fed—a hypothesis he believes was proven correct.