Gundlach: The Fed is almost anxious to start growing balance sheet

Author: Adam Button | Category: Central Banks

Jeff Gundlach on CNBC:

  • The Fed has an easy job, the bond market says one cut
  • The real question is 'what's going to happen to the dots', the Fed probably wishes they never came up with the dots
  • I think dots may signal another cut this year and none next year
  • Clearly short rates getting out of the Fed's control is problematic
  • There aren't enough reserves in the system for the market
  • Short-rates spiking is 'in no way positive'
  • There are pockets in the system where liquidity isn't there and this is in a stable situation, imagine a different environment
  • I think they will expand the balance sheet
  • People now feel like negative rates are a semi-permanent policy
  • Negative rates are a short-term solution that exacerbates long-term problem on debt
  • You're not going to hear 'mid-cycle adjustment' today
  • The data is nowhere near as scary as it as a month ago
  • The Fed doesn't really need to cut rates
The mid-cycle adjustment language is an interesting one. Powell is going to be directly asked about it today and it's a tough one to dance around.
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