Billionaire Ray Dalio Says Fed Shouldn’t Cut Rates Yet, Warns Against Aggressive Easing of Monetary Policy for Bond Market

Billionaire investor and founder of hedge fund Bridgewater Associates, Ray Dalio, thinks it is not yet time for the Federal Reserve to ease the US monetary policy.

In a new Bloomberg interview, Dalio says the Fed “should not cut interest rates” despite the pressure to do so.

Dalio says that over the longer term, when the current Fed Governor Jay Powell’s term ends in May of 2026, the Fed could, however, end up cutting rates due to political pressure.

“There’s a great deal of uncertainty and there’s a deterioration in sentiment, but really the actual economy. So they (the Fed) are in a difficult position.

I think that when we look farther out, we’re dealing with the political aspects… I think that when there’s a new Fed chair, there will likely be more inclination to cut rates because it’s an old story of conflict between those in power, in political [power], who like stimulation. And because of the enormous impact of interest rates on debt service, because the debts are so large, there’s going to be pressure that way.”

According to Dalio, the aggressive easing of US monetary policy could negatively impact the bond market.

“I think the markets, if they were to see a too aggressive cut in monetary policy, too inappropriate cut, that it would actually be bad for the bond market….

… watch the yield curve. As you get rates rising by long rates and you have also at the same time, let’s say, movement down in the dollar and rises in gold, that kind of dynamic is reflecting a movement out of the bonds. Because the value of money matters a lot.”

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