Gundlach Says Fed Should Raise Rate to 3% on Wednesday

(Bloomberg) -- DoubleLine Capital Chief Executive Officer Jeffrey Gundlach said the Federal Reserve should raise its target interest rate to 3% on Wednesday, calling for a hike that would be dramatically larger than what most forecasters are predicting.

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The outspoken bond manager’s suggestion, delivered in a Tuesday night tweet, compares with forecasts from traders and banks including Goldman Sachs Group Inc. that the Fed will raise by 75 basis points on Wednesday. That would lift the upper bound of the Fed funds target rate to 1.75%.

Markets started pricing in a 75 basis-point move following the New York Fed’s survey on Monday showing US consumers expect prices to rise even faster over the next year, as well as reports from the Wall Street Journal and other news outlets including Bloomberg News on the likelihood of such a move.

The Fed will announce a decision and publish fresh forecasts at 2 p.m. Wednesday in Washington.

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