The "New Bond King" says that it is "impossible" for the Federal Reserve to cut interest rates this year.

Release Time：2026-05-18

Jeffrey Gundlach, CEO of DoubleLine Capital, has made it clear that the possibility of the Federal Reserve cutting interest rates this year has largely vanished, as stubborn inflation and signals from the interest rate market have jointly blocked the space for monetary easing.

On May 18th, according to Bloomberg, in an interview with Fox News' "Sunday Morning Futures" program, Gundlach pointed out that the market had previously expected two interest rate cuts this year, but inflation data had never cooperated. He said directly:

With the two-year Treasury yield nearly 50 basis points above the federal funds rate, I see no possibility of a rate cut at all.

As previously mentioned in an article by Wall Street Journal, the US CPI in April rose by 3.8% year-on-year, marking the fastest growth rate since May 2023. Meanwhile, Gundlach warned that the next CPI figure will "start with a 4".

Meanwhile, the Iran war has pushed oil prices up sharply, further transmitting to the US inflation data and adding to the already difficult price pressure. Gundlach also issued warnings about multiple market risks such as high stock valuations and private credit risks, and the overall market risks are quietly accumulating.

Inflation remains stubborn, and the window for interest rate cuts has closed.

Gundlach's judgment that the Federal Reserve will not be able to cut interest rates this year is based on two key dimensions: the persistent inflation data that has exceeded expectations and the clear signals sent by the interest rate market.

The CPI in April rose by 3.8% year-on-year, the highest increase in nearly two years, far exceeding the Federal Reserve's 2% policy target. Gundlach said that DoubleLine's model shows that the overall data of the next CPI will "start with 4", indicating that inflationary pressure not only has not subsided but is also showing a further upward trend.

From the perspective of the interest rate market, the yield on two-year US Treasuries is currently nearly 50 basis points higher than the federal funds rate.

Gundlach believes that this spread structure itself constitutes a technical obstacle to a rate cut - market pricing is already reflecting expectations of sustained inflation, and if the Fed cuts rates at this time, it will face a serious risk to its credibility.

The oil price shock brought about by the Iran war is another variable that cannot be ignored. The increase in energy prices will directly permeate into each sub-item of the CPI, adding new resistance to the decline in inflation. Gundlach predicts that this upward trend will continue to be reflected in the inflation reports in the coming months.

Gundlach gave a direct assessment of the situation of the new Federal Reserve Chairman Kevin Warsh: He took over the position at a "difficult time".

As soon as Powell took office, he was confronted with a complex situation where high inflation, oil price shocks and divergent market expectations coexisted. The policy space of the Federal Reserve was constrained in multiple ways - it could neither ignore the inflationary pressure and rashly cut interest rates, nor could it deal with the uncertainty of the economic growth outlook.

Analysts point out that Gundlach's remarks suggest that in the short term, Warsh has little room to implement loose policies.

The Hidden Speculative Concerns Behind the Strong Stock Market

Despite the volatile macro environment, the U.S. stock market has remained "exceptionally strong". Gundlach offered his own interpretation: It is precisely because the Federal Reserve has held its ground on the issue of inflation that the stock market has been able to continue its upward trend.

"When the Federal Reserve does nothing about inflation, the stock market will soar," he said. The continuous better-than-expected corporate earnings further fueled the speculative sentiment in the market.

However, Gundlach also pointed out that the current stock market has already internalized a considerable degree of risk. "Market valuations are very expensive and the speculative atmosphere is thick," he said. Although earnings data have continuously exceeded expectations, this situation itself is "fueling speculative mania."

At the asset allocation level, Gundlach said that he has been "very, very bullish on commodities for the past three years or so". He pointed out that negative real returns on bonds and the diversion of interest from speculative assets like Bitcoin by the predicted market have left investors with few attractive alternatives to stocks.

In the interview, Gundlach once again issued a warning about the private credit market, his words direct. When asked if he was worried about this sector, he replied, "Sure, I am indeed concerned."

He pointed out that there is a disturbing structural feature in the private credit market: "This market always seems to need new investors to come in." He believes that this might reflect the greedy logic of sponsors - "They just want to manage more and more assets."

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