Gundlach Says Fed Likely to Again Cut Rates 50 Basis Points

(Bloomberg) -- The Federal Reserve is likely to cut its benchmark interest rate another 50 basis points when it meets this month to try to cushion the U.S. economy from the widening impact of the coronavirus, according to money manager Jeffrey Gundlach.

“I think they cut 50 in the next meeting in just two weeks,” Gundlach said Thursday in an interview on CNBC.

Fears of the coronavirus spreading across the U.S. and disrupting the broader economy have hit markets hard. The S&P 500 Index has dropped 9% in the past 10 days, companies have issued financial and sales warnings, and 10-year Treasury yields hit record lows. The sudden swing in sentiment after months of bullish performance has left policy makers scrambling -- including the Fed’s emergency rate cut earlier this week -- and investors wondering if they’re seeing a repeat of 2008’s meltdown.

Gundlach also said in the interview:

• The Fed’s benchmark rate is likely to go to zero
• The central bank will probably resume asset purchases or quantitative easing rather than going negative on interest rates
• Gold is the best thing to own now and is headed to new highs
• Financial and transport sectors are “falling knives” that should be avoided

To contact the reporter on this story: John Gittelsohn in Los Angeles at johngitt@bloomberg.net

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, Josh Friedman, Alan Mirabella

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