Jeff Gundlach, founder of DoubleLine and one of the most prominent bond investors in the United States, argued Wednesday that the Federal Reserve’s Gundlach Fed rate hike of 25 basis points fell well short of what the situation demanded, and that policymakers should have moved by twice as much.
The FOMC voted 12-0 on 16 September 2026 to raise the federal funds rate by 25 basis points, bringing the target range to 3.75%–4.00%, the Fed’s first increase since 2023. The committee said in its statement that ‘inflation remains elevated’ and that the move would ‘support a timelier return to the Committee’s 2 percent goal.’
‘I would have called that stun and done,’ Gundlach said on CNBC’s ‘Closing Bell,’ riffing on the phrase ‘one and done’ used by those who believe the Fed will stop after one or two hikes rather than pursue a full tightening cycle. His preference was unambiguous: ‘I would have just done the 50 and then see what the data does.’
The Gap Between the 2-Year Yield and the Gundlach Fed Rate Hike Argument
Gundlach’s case for a half-point move rested on a straightforward market signal. The 2-year Treasury rate sat more than 100 basis points above the Fed funds rate, he said, a gap he described as a ‘truing up’ that a larger hike would have addressed. The 2-year yield, which tracks short-term rate expectations, climbed around 7 basis points on Wednesday afternoon and closed the session at 4.74%, according to FRED data from the Board of Governors of the Federal Reserve System. Gundlach noted that the 2-year ‘leads’ the Fed funds rate, and said Wednesday’s move confirmed that hypothesis.
He said he worries the inflation problem may not be ‘fully respected’ by policymakers. The concern has some support in the Fed’s own projections: 12 of the 18 FOMC members who submitted projections placed appropriate policy for 2026 at an average of 4.125%, implying at least one more 25 basis-point hike this year. Four members favoured an additional 50 basis points in 2026; only two saw no further increases as appropriate.
The July FOMC meeting lends some context to the hawkish undercurrent within the committee. At the 29 July meeting, the Fed held rates steady at 3.50%–3.75% by a 9-3 vote. Three dissenters, Beth M. Hammack, Neel Kashkari, and Lorie K. Logan, preferred to raise rates by 25 basis points at that meeting. Wednesday’s unanimous 12-0 decision therefore represented a consolidation of the committee rather than a decisive shift in the hawkish direction Gundlach wanted.
A Sceptical Reading of Warsh’s Press Conference
Markets did not react warmly to the decision or its presentation. Major indices initially rose on the rate decision news, then surrendered those gains and fell sharply in the final half-hour of the session, according to Charles Schwab’s FOMC analysis. The Dow Jones Industrial Average fell 700 points in late afternoon trading, with losses accelerating during and after the press conference by Chairman Kevin Warsh.
Gundlach was blunt about his view of that performance. ‘I thought the content was pretty thin,’ he said of Warsh’s remarks, later adding that the central bank chief was ‘opaque.’ He said he was not surprised to see stocks sell off during the briefing.
At his press conference on 16 September 2026, Warsh explained the committee’s earlier inaction by saying that ‘a good majority of my colleagues and I thought the wiser course then would be to await new information in the inter-meeting period,’ referencing the decision to hold rates at the July meeting.
Gundlach reserved particular scepticism for Warsh’s announcement of task forces to evaluate the Fed’s operations. Warsh has stood up five groups covering communications, inflation frameworks, data, productivity and jobs, and balance sheet policy, described by Brookings as the most consequential review of US monetary policy since the FOMC adopted a formal inflation target in 2012. The Federal Reserve’s task forces are co-led by external advisers and were formally constituted in July.
Gundlach’s reaction was sardonic. ‘It’s like a company that’s having trouble that wants to hire consultants,’ he said. ‘The consultants always want to figure out what the … people at the company really want to hear, and then they tell them what they want to hear.’
Whether the task forces produce anything Gundlach would recognise as candid feedback is now a secondary question. The primary one is whether the Fed’s next move, which most committee members appear to expect, will be the larger increment Gundlach has consistently argued for. The 2-year Treasury’s next signal will arrive well before the FOMC’s following meeting does.
