Gundlach: Fed Rate Hike Necessary as Oil Holds Above $100

Jeff Gundlach, founder of DoubleLine, stated on Wednesday that the Federal Reserve should raise interest rates again in December, arguing that the central bank is currently behind the curve. Gundlach made the comments on CNBC's "Closing Bell" following the Fed's decision to hold rates steady at its October meeting.

The Fed left its overnight rate unchanged at 3.75% to 4.00%. This follows a 25 basis point increase at the September meeting. Gundlach noted that the 2-year Treasury note yield trades around 4.7%, a level that sits well above the current policy rate. He described this gap as evidence that the Fed needs to tighten monetary policy more aggressively.

Gundlach cited persistent inflation and rising commodity prices as primary drivers for his stance. He projected that headline Consumer Price Index inflation is headed toward 4%. "The commodity index is rising in a bull market, and I don't understand why the Fed is so reluctant to move," he said. U.S. oil prices continued to trade above $100 per barrel on Wednesday, a factor Gundlach identified as a key variable for future policy decisions.

The comments refer to remarks made by Fed Chairman Kevin Warsh at the post-decision news conference. Warsh described the macroeconomic environment as strong. Gundlach questioned the rationale for the pause, asking, "What are you waiting for? You just upgraded the economy right here." He suggested the Fed should have implemented a 50 basis point increase in September rather than a gradual approach.

Market data supports Gundlach's outlook. The CME FedWatch tool indicates an 85% probability that the Fed will raise rates by 25 basis points at its December meeting. In its statement, the Fed said it will use further information to determine the correct policy to bring inflation back to its 2% goal. Warsh reiterated that future policy decisions cannot be determined at this time.

Gundlach also addressed a change to the Fed's meeting calendar. Warsh announced that one of the eight scheduled gatherings in 2027 and two in 2028 will focus on policy strategy without a vote on the fed funds rate. Gundlach said the move did not surprise him. "I don't think eight meetings is really necessary," he said, adding that he would favor having only six rate-setting meetings to allow more time for data to filter in.