Fed might hike rates, but it will be a bad decision, warns bond king Gundlach

The bond king in the US markets Jeffrey Gundlach says what the US Federal Reserve does would be entirely dependent on what markets do. He forecasts a quarter point rate hike. Gundlach opines that the US Fed may regret its decision on rate hike in the wake of fragile economy situation.

The US Federal Reserve philosophically wants to raise interest rate and will use selectively back-tested evidence to justify its decision. All the market players across the world markets predict rate hike this time. Considering present conditions, Gundlach says 'coast might be clear' for the US Fed to hike interest rate.

The US Federal Reserve's next meeting is scheduled during 15-16 December. Entire world is looking to Fed's decision whether it'll hike interest rate or not. 100 percent of economists forecast that Fed will raise interest rate. Bloomberg's WIRP reading, which tracks market expectations for interest rates, is giving 80 percent probability on rate hike. 

According to a report by The Telegraph Times, Jeffrey Gundlach, Chief Executive Officer (CEO) at DoubleLine Total Return bond will be one of the anchors on CNBC an hour before the Fed rate decision on next Wednesday.

Gundlack opines the US Fed action unthinkable given the prevailing several dynamics of the markets.

The US Federal Reserve may find itself 'conundrum' in a year or two if it increases interest rates. Despite weak economic conditions in the US, the central bankers are more inclined for interest rate hike. Gundlackh says he sees real carnage in the junk-bond market. 

Jeffrey Gundlack manages Los Angeles-based $51.3 billion DoubleLine Total Return Bond fund, which outperformed 99 percent of competitors in the past five years.

Gundlach said the US Fed Reserve might regret its decision to increase interest rate amid indications of fragile economy and sluggish credit market, as reported by Bloomberg.

"This is a little bit disconcerting that we're talking about raising interest rates with the credit markets in corporate credit absolutely tanking. They're falling apart," said Gundlach, who sees several danger signals confirming the bad time for raising interest rate. 

The US Federal Reserve is on the 'knife's edge,' says Gundlach, who notes that the market response to latest jobs report enhanced the probability of rate hike, as reported by Business Insider. This also gave the US Fed more room to take a decision. He also says that US Fed will require WIRP to comfortably take a decision on rate hike. 

The US Federal Reserve Chair Janet Yellen recently said a rate hike this month was a live option as the US economy is doing well. As per the latest jobs data, US economy generated 211,000 jobs in November beating the forecast. The US Labor Department released jobs data on 4 December.