Gundlach: The Fed is almost anxious to start growing balance sheet
Jeff Gundlach on CNBC:
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.
- 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