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Billionaire Jeffrey Gundlach, sometimes known as the “Bond King,” believes that the Federal Reserve will likely raise interest rates at its meeting this coming March. He also warns that this could be the last time they do that, and that it looks like their policy of inflation is becoming stronger.

“Bond King” Jeffrey Gundlach’s Warning

Jeffrey Gundlach works for a company called Doubleline and is really rich at the age of 2.2 billion. He’s known as the “Bond King” because he was featured on the cover of Barron’s magazine in 2011 with that title. Recently, he did an interview with CNBC where he shared his thoughts on interest rates hikes in the future.

After two banks (Silicon Valley Bank and Signature Bank) failed, a lot of economists changed their predictions about the Federal Reserve raising interest rates. Even Goldman Sachs, an important investment bank, thinks that the Federal Reserve will not increase interest rates in March.

Gundlach said it is unlikely that the Fed will agree to raise interest rates by 50 basis points when they have their meeting next week. He believes they will raise it by only 25 basis points instead.

The problem Silicon Valley Bank caused is making it difficult for Jay Powell (the Chair of Fed) to do what he planned. To remedy this, the executive plans a 25 basis points increase to save the program and their credibility. The executive does not want to do it but needs letters been sent over the past six months about these issues taken into consideration.

On Sunday, three important organizations – the Treasury Department, the Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) – revealed a plan to help people affected by the failure of two banks: Silicon Valley Bank and Signature Bank. The Treasury Department will give up to $25 billion from its Exchange Stabilization Fund for any possible losses. In addition, The Federal Reserve is going to lend money for up to one year to those affected by the bank failures.

Gundlach was expecting the Fed to increase interest rates in March, but the market thinks it might not happen and is almost like a 50/50 chance.

Billionaire Gundlach shared his warning that the economy is heading towards a recession based on something called a Treasury yield curve, which has become very steep. According to Gundlach, this type of thing usually occurs months before an economic downturn. He also commented that the Federal Reserve is putting money into the system via loans, which means inflation will increase.

Do you agree with Jeffrey Gundlach? Let us know in the comments section. We’ve also included pictures to help you understand this better.