Prepare for another Fed rate hike due to a problematic surge in oil prices, says billionaire investor Jeff Gundlach.

Prepare for another Fed rate hike due to a problematic surge in oil prices, says billionaire investor Jeff Gundlach.

Expect Another Fed Rate Increase Due to Surging Oil Prices: Insights from Investor Jeff Gundlach

Investors should prepare themselves for another interest-rate increase by the Federal Reserve, as billionaire investor Jeff Gundlach suggests that the recent surge in oil prices is likely to reignite inflation pressures¹.

Gundlach, the CEO of DoubleLine, believes that the probability of rate hikes has increased due to the unexpected spike in oil prices. Speaking to CNBC, he warns that the oil spike is “going to be problematic”². To support his argument, Gundlach explains that the base effects and the roll-off of the Consumer Price Index (CPI) will likely lead to inflation rising to potentially even above 4%³. This increase in inflation, especially driven by surging oil prices, is likely to raise the chances of a rate hike by the Federal Reserve⁴.

The price of oil has soared past $90 a barrel, reaching a 10-month high, after Saudi Arabia and Russia implemented production cuts⁵. This rise in prices is in response to efforts by major oil producers to maintain price stability. Alongside this, the robust US economy has fueled the demand for crude, further driving up prices⁶. However, the surge in oil prices now poses a threat to the US inflation rate that the Federal Reserve has been trying hard to keep under control⁷.

In an attempt to curb inflation, the Federal Reserve has already raised benchmark rates by over 500 basis points since early 2022. Despite this effort, consumer-price increases have only marginally eased, from highs above 9% to 3.7% in August⁸. The surge in oil prices could potentially lead to a resurgence of inflation⁹.

Although the Fed opted to keep interest rates unchanged at 5.25%-5.5% during their most recent meeting, Gundlach anticipates a rate hike at the next meeting¹⁰. However, he also speculates that the Fed is likely to ease policy in the first half of 2024¹¹. Gundlach goes even further, expressing his belief that rate cuts in the first half of next year are highly probable and may be larger than what the Fed anticipates¹².

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In summary, the recent surge in oil prices has caught the attention of billionaire investor Jeff Gundlach, who predicts another interest-rate increase by the Federal Reserve. With oil prices climbing and threatening to reignite inflation, the chance of a rate hike is higher than previously expected¹³. This situation poses a challenge for the Federal Reserve as they aim to maintain price stability amidst global supply cuts and increasing demand for crude¹⁴. It remains to be seen how the Fed will respond to these growing inflation pressures and whether rate hikes or cuts will be introduced in the near future.

• Economy
• Inflation
• Saudi Arabia