Fed Unlikely to Cut Interest Rates in June: Gundlach

Here are additional comments he made during a webcast for his DoubleLine Total Return Bond Fund on the Fed’s next steps:

• July rate cut is “a pretty good possibility,” and a cut by September is basically “a lock” — and maybe that one’s a 50-basis point reduction;
• “Fed will try to say as little as possible” at next meeting;
• Powell’s presentation will be lighting fast given the difficult position the Fed is in on rates;
• “You only know with hindsight whether something’s an insurance cut,” says Gundlach.
• You might get a 50-basis point cut in September;
• Says “extremely probable” Fed will have to cut rates not just once but maybe up to four times;
• Gundlach says the Fed will blame the tariffs for why they’re deviating from previously iterated outlooks;
• “I can’t imagine what they’re going to do with the dots,” says Gundlach, adding that it would be odd if they put a cut in the dot plot and don’t immediately deliver one;
• “Hard time believing” 2020 median dot will imply a hike;
• On Fed Chair Jerome Powell’s balancing act: There’s a huge divergence between the last dot plot and what the bond market has been doing.

Here’s what the DOTS function shows:

Source: Bloomberg, 6/13/2019

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