Jeffrey Gundlach, CEO of DoubleLine Capital and widely known on Wall Street as the "bond king," criticized the Federal Reserve's 0.25 percentage point rate hike Wednesday, saying the central bank should have raised rates by 0.5 percentage points. [Getty Images]
Jeffrey Gundlach, CEO of DoubleLine Capital and widely known on Wall Street as the "bond king," criticized the Federal Reserve's 0.25 percentage point rate hike Wednesday, saying the central bank should have raised rates by 0.5 percentage points. [Getty Images]

Jeffrey Gundlach, CEO of DoubleLine Capital and widely known on Wall Street as the "bond king," said Wednesday (local time) that the Federal Reserve should have raised its benchmark interest rate by 0.5 percentage points rather than 0.25 percentage points, arguing the move failed to adequately reflect the severity of inflationary pressures.

Speaking to CNBC that day, Gundlach said the Fed should have gone with a 50 basis point hike instead of 25. He said the central bank should have created a "stun and done" situation — delivering one decisive shock to firmly signal its tightening stance and reset market expectations.

"They should have done 50 basis points and then watched what the data showed," he said, arguing that a preemptive and forceful move was needed. He added that America's inflation problem is still "not being taken seriously enough."

Gundlach also took aim at Fed Chair Kevin Warsh's post-meeting press conference, calling it "pretty poor" and saying the central bank chief's explanations were "opaque." Warsh has long held that if the Fed sends too many signals to markets, those messages can entrench confirmation bias. In keeping with that view, he has shown a tendency to communicate less with markets than his predecessors did.

Gundlach was equally dismissive of Warsh's plan to form an outside task force to improve the Fed's operational efficiency, comparing it to "a company in trouble hiring consultants." "Consultants always figure out what the people in the company really want to hear, and then they just tell them what they want to hear," he said.

US Treasury yields climbed again after the Fed raised its benchmark interest rate by 0.25 percentage points that day. The 10-year Treasury yield — the global interest rate benchmark — rose 2.9 basis points from the previous session to 5.025 percent as of 5 p.m. that day.

The 2-year Treasury yield, which is more sensitive to monetary policy, rose 7.7 basis points to 3.868 percent. The 30-year Treasury yield held steady at 5.363 percent.


kate01@heraldcorp.com