(Bloomberg) -- The Federal Reserve's decision to keep its target range for its benchmark rate unchanged leaves the door “wide open” for it to act if the economy slips into recession, DoubleLine Capital's Jeffrey Gundlach said on CNBC.
“The ‘higher-for-longer' concept has a really dark underbelly to it that I think has affected the bond market over the past six or eight weeks,” Gundlach said. “This interest expense is starting to come home very quickly. One thing that the market has to confront is we cannot sustain these interest rates and this deficit any longer.”
Fed Signals Yield Rise Reduces Need to Hike, But Door Still Open
Gundlach sees a recession in the first part of next year possibly necessitating the lowering of the key rate to 2.5% by early summer. The current target rate remains at 5.25% to 5.5%.
“If the economy rolls over as I expect, the Fed is not going to cut rates 50 basis points, they're going to cut rates 200 basis points,” Gundlach said.
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