Hedge Fund Giants Question Raising Interest Rates

The serious discussion about this possibility came first from Dario (Ray Dalio), the largest in the world.

The founder of Bridgewater said in March 11th that if the Fed raised interest rates too fast, the market could repeat the collapse in 1937, he said.

"We don't know that the Fed is not sure how much the tightening of policy will overturn the apple (market crash).

We think the Fed is better late than the normal level. "

Ray Dalio will compare the market in recent years with those on the eve of 1937.

The similarity between the two periods is that interest rates have been reduced to zero, monetary policy has stimulated asset prices to rise sharply, and the US economic recovery has also been stimulated.

He recalled: during the period from 1937 to March 1938, when the Federal Reserve tightened monetary policy by raising interest rates several times, the bond market showed massive sell-off, and the stock market plunged by over 50%.

This prompted the fed to finally reverse its policy.

Ray Dalio is not the only star manager in the financial industry who is worried about the risk of the Federal Reserve raising interest rates too fast.

Jeffrey Gundlach, known as the "new debt king", has also issued a warning to the Fed's radical policies recently.

Gundlach, a co-founder of DoubleLine Capital, called the fed a "fool" this month. If the Fed raises interest rates in mid 2015, it may have to cut interest rates in the future, because other central banks in the world have already had similar precedents, but the Fed has not learned from them.

Gundlach's ideas and

The speech of vice chairman Stanley Fischer echoed.

On Monday, Fischer delivered a speech on monetary policy at the New York economic club.

The Fed's path to raising interest rates is uncertain.

After raising interest rates for the first time, the Federal Reserve will assess the monetary policy that should be adopted at every subsequent meeting, which may be a further increase in interest rates.

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Tad Rivelle, chief fixed income investment officer of TCW, which manages $175 billion 300 million in assets, argues that the Fed's views on interest rates released by the financial market are contradictory.

He called it "Michael Jackson'S MOONWALK" because it looked like he was going to move in a certain direction, but in fact he was heading in the opposite direction.

After the announcement of the Fed's interest rate resolution last Wednesday, Morgan Stanley directly indicated that the Fed would not raise interest rates this year, Morgan said.

Ellen Zenter, chief economist of the US bank, said the lower core inflation and the appreciation of the US dollar will block the Fed's interest rate hike.

On Monday, the global interest and monetary research team of BoAML also joined the debate. The team said that the latest dot matrix map of FOMC showed that only two members thought that interest rates should not be raised this year. 41% of the members thought that two interest rates should be raised this year, and the implied probability from the options market showed that the probability of not raising interest rates this year was only 14%.

On the surface, it seems that the Fed has basically decided to normalize interest rates this year.

The bank wrote in its report:

But we still believe that the market underestimates the possibility of not raising interest rates.

If inflation, especially the core element of inflation, continues to decline, it will be difficult for the fed to have "reasonable confidence" in the return of inflation to its medium-term goals.

So if core inflation continues to fall, we think the Federal Reserve may delay interest rate hikes.

But Merrill Lynch seems to have little confidence in its speculation. The bank said: it is worth noting that although we believe that the market may underestimate the possibility of not raising interest rates this year, we do not think this is the most likely scenario.

Our economists still expect the Federal Reserve to normalize interest rates in September.