"New Bond King" Gundlach: Reducing interest rates by 50 basis points is still not enough, the Federal Reserve is a bit behind the situation.

Founder of DoubleLine Capital, Jeffrey Gundlach, who is known as the "New Bond King," said that he was not surprised by the Federal Reserve's significant 50 basis point rate cut, but believes that further cuts may be needed due to signs of a possible economic downturn in the United States. On Wednesday, the Federal Open Market Committee voted 11-1 to lower the benchmark interest rate from a 20-year high of 5.25%-5.5% to a range of 4.75%-5%, marking the first rate cut since the outbreak of the pandemic. Earlier this week, Gundlach had predicted that the Fed, led by Powell, would cut rates by half a percentage point. He stated at a conference in California that the Fed is "behind the curve" as layoffs indicate that the economy is already in a recession. Gundlach said on Wednesday that the Fed is still "slightly" behind as some bond yields are around 3.50%. He mentioned that since July 31, the yield on two-year US Treasury bonds has dropped by more than 50 basis points, which has increased his confidence in the Fed cutting rates by half a percentage point. "I think Powell is more comfortable right now with the bond market really leading his way. The bond market's been very stable for two years, for maybe five- and ten-year Treasury notes as well at about 3.50%," he said. Bond market experts say that this level "implies the terminal rate for the federal funds rate is 3.50%." Gundlach stated, "I think Powell is uncomfortable with whats going on." Regarding signs of economic trouble, Gundlach mentioned high credit card rates as a concern. "Consumer debt is very high. I expect the economic data in the reports ahead to be softer. I still think theres a high likelihood that the history books will say September 2024 was the start of the recession."