Gundlach sees risk of Fed over-easing

[Vanity Fair New Establishment Summit - Day 1]
Matt Winkelmeyer

The Federal Reserve's increase in the number of rate cuts projected [https://seekingalpha.com/news/4495758-fed-sees-two-more-25-bp-cuts-this-year-as-jobs-cool-dot-plot] to five or more by the end of the year is "a little disturbing," said Jeffrey Gundlach, known for his success in the bond markets, in a broadcast interview.

The risk of higher inflation shouldn't be discounted, the founder of DoubleLine Capital, warned. Lower interest rates can lead to higher inflation, as money is cheaper to borrow.

Still, the Federal Open Market Committee's move to cut the federal funds rate [https://seekingalpha.com/news/4495784-federal-reserve-lowers-rate-by-25-basis-points-first-cut-since-december] target range by 25 basis points on Wednesday was the right move, he said on CNBC. He expects another rate cut at the Fed's October meeting.

"They seem to be in a cutting mood," he added. Markets are indicating that the odds are much better for a cut than a hold, Gundlach noted.

The probability of a 25-bp cut in October rose to 86.6%, compared with 74.3% on Tuesday, according to the CME FedWatch tool. [https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html]

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