Dalio: Trump's Fed nominee shouldn't cut interest rates 'in an era of stagflation'
Kevin Warsh's nomination has not yet been confirmed by the Xi.
If the new Fed chief lowers rates, the market will lose confidence in the regulator, Dalio warned / Photo: Flickr/"DSC_5234" by Web Summit, CC BY 2.0)
The U.S. economy has entered a period of stagflation: in these conditions, it would be a mistake for Kevin Warsh, nominated as the next chairman of the Federal Reserve System, to reduce interest rates. This was stated by billionaire Ray Dalio, founder of Bridgewater Associates, on CNBC.
Details
Dalio said sustained inflationary pressures amid a slowing U.S. economy are creating an environment in which regulators should proceed with caution. "We are certainly in a period of stagflation," Dalio said Monday, April 27. - "Because of the challenges we're facing: inflation has become more pressing and it's further away from the target level.
The investor emphasized that if the Senate approves Kevin Warsh's nomination to head the Fed, noting that the road to that is now open, and if Warsh cuts rates after that, it could undermine confidence in the central bank at a critical time.
Traders are now laying down a 100% probability that the Fed will leave rates unchanged at this week's meeting; federal funds rate futures indicate the most likely scenario is for monetary policy to remain unchanged through the end of the year, CME's FedWatch tool shows.
Dalio also noted that further growth in U.S. stocks is possible even despite the war between the U.S. and Israel with Iran, as the reporting season continues and companies show an increase in profits. At the same time, the investor advised to keep 5% to 15% of the portfolio in gold to diversify risks. "I think it's important to realize that gold is a type of money," MarketWatch quoted Dalio as saying. - It's the oldest form of money. It's the second-largest reserve currency of central banks."
Context
In May, the powers of the current Fed Chairman Jerome Powell will expire. The Fed meeting on April 27-28 will be the last under his primary authority. However, Powell said that he will continue to serve as Fed Chairman if Worsh is still not approved by Congress by the time his term ends.
In April, the U.S. Justice Department dropped its investigation against Powell in connection with the Fed's headquarters renovation project, which investigators believe led to cost overruns.
This article was AI-translated and verified by a human editor
