Billionaire investor Jeff Gundlach says the odds of a 2023 Fed rate cut are over 75%, as the coming recession bites

Jeffrey Gundlach is the CEO of investment firm DoubleLine.

CNBC/Getty Images

• Billionaire investor Jeff Gundlach thinks there's a 75% chance the Fed will cut rates in 2023. 
• Elevated risks of a US recession in 2023 will force the Fed to pivot in its policy, he said. 
• Jumbo rate hikes by the Fed could also mean inflation falls lower than expected, Gundlach said. 

Billionaire investor Jeff Gundlach believes the odds of a Fed policy U-turn in 2023 are over 75% given the US economy is highly likely to enter a recession. 

The central bank raised interest rates by 50 basis points in December, slowing the pace of its tightening campaign after four consecutive 75 basis point increases, as it continues with its efforts to bring inflation down from 40-year highs to its 2% target. 

Gundlach believes the aggressive monetary tightening by the Fed will trigger an economic downturn in 2023, forcing policymakers to cut rates. "I think the odds are probably greater than 75% that there's a rate cut in 2023," Gundlach  said in a December investor webcast hosted by his firm DoubleLine Capital, per CNBC.  

"I think the pivot will be just as quick when they face the adversity, which is the effect of the policies, the tremendous interest rate increases that we've seen just in the past eight, nine months or so," he added. 

Gundlach has raised the alarm on recession risks before. In November, he said there's an 80% chance the US will tip into a painful contraction next year, while also predicting that the Fed will hike the benchmark interest rate to a peak of 4.5%, lower than the 5% many economists have projected. 

On the inflation front, Gundlach believes the US Consumer Price Index could come in lower than what economists expect, given the Fed's jumbo rate hikes.

Inflation has been slowing over the past few months, with November's print coming in at 7.1%, down from the previous month's 7.7% and a June peak of 9.1%. 

"If you have that kind of momentum on the downside, it's just not going to stop. Like you hit brakes on a car. You don't just stop in your tracks right there. You have momentum going," Gundlach said.

"I think that if these policymakers follow through and the inflation rate has that momentum, I wouldn't be surprised if it went lower than what the forecasts are, at least temporarily," he added.

Read the original article on Business Insider

from Business Insider https://ift.tt/NI2eXRr
via IFTTT