DoubleLine CEO Gundlach says Fed’s Powell ‘caving to the stock market’

By Jennifer Ablan

(Reuters) – Fragile equity markets forced Federal Reserve chairman Jerome Powell to pledge on Wednesday that the Federal Reserve will be patient with future interest rate hikes, said Jeffrey Gundlach, chief executive of DoubleLine Capital.

“He’s caving to the stock market. The stock market scared him,” in late 2018, Gundlach, who oversees $123 billion, said in a phone interview with Reuters.

Citing rising uncertainty about the U.S. economic outlook, Powell said the case for raising rates had “weakened” and, in a statement, the U.S. central bank dropped its earlier expectation for “some further” tightening.

The Fed also shifted to a more dovish stance on its ongoing shedding of assets, saying it was prepared to adjust its plans based on economic and financial developments.

Powell, speaking to reporters after the end of the Fed’s latest two-day policy meeting, said the central bank would likely stop trimming its $4.1 trillion balance sheet sooner, leaving it with more assets than previously expected.

“Even though they won’t say so, this shows that Quantitative Tightening will be slowed down,” Gundlach said. “And if need be, the Fed will expand the balance sheet. QE (Quantitative Easing) is the ‘unnamed’ other policy tool he referenced in case lowering the Fed Funds rate proves not to be enough to strengthen the economy/markets.”

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