CNBC reported Wednesday that DoubleLine Capital founder Jeff Gundlach said the Federal Reserve must raise rates in December unless oil prices fall meaningfully, after the central bank left borrowing costs unchanged at its October meeting.
The Fed’s October decision kept its target range at 3.75% to 4%, CNBC reported.
On CNBC’s “Closing Bell,” Gundlach challenged the pause after Fed Chair Kevin Warsh described economic conditions as strong at a post-decision news conference. Gundlach said he did not understand why the central bank was reluctant to act and argued that its response was too slow.
He pointed to a contrast between the Fed’s overnight rate, set at 3.75% to 4%, and a roughly 4.7% yield on the two-year Treasury note. Gundlach said the spread indicated that monetary policy should tighten further. He also cited rising commodity prices and his view that headline consumer inflation was moving toward 4%, CNBC reported.
The view follows the Fed’s September quarter-point increase. Gundlach said after that decision that officials should have raised rates by half a percentage point, rather than 25 basis points, CNBC reported.
Oil’s price also shaped his December call. CNBC said U.S. crude remained above $100 a barrel Wednesday, while CME’s FedWatch tool put the odds of a 25-basis-point December increase at 85%. That probability reflects market pricing; Warsh said after the October decision that future policy moves could not be determined in advance.
Warsh also said the Fed would devote one regular meeting in 2027 and two in 2028 to policy strategy. No vote on the federal funds rate is planned at those sessions, according to CNBC. Gundlach said he would prefer six rate-setting meetings a year, arguing that eight meetings leave little time for new data to accumulate.
The Fed’s December meeting is the next policy decision in view.
