Ray Dalio, chief executive and founder of Bridgewater Associates, the world's largest hedge fund, believes the Federal Reserve's next move will be to launch another round of quantitative easing (QE). Dalio has a good track record, having predicted the global financial crisis back in 2007. Now, with asset prices highly inflated and central bankers' abilities to ease monetary policy reduced, he's worried what will happen in the next downturn.
Dalio sees no reason for the Fed to raise rates. He believes the central bank is focusing on the wrong areas, looking at the cyclical short-term debt cycle when it should care more about the 'secular' long-term one. It's like the lead-up to the 2008 crisis: the Fed "just gave attention to the GDP gap and missed the whole bubble and we had an economic collapse". Now "the risks of the world being at, or near, the end of its long-term debt cycle are significant" and shouldn't be ignored.
With deflation much more of a threat than inflation, Dalio expects the Fed to have to resort to further money-printing. "Raising rates is a restrictive policy... countries around the world shouldn't be tightening monetary policy, they should be easing it."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
BP's 'long, painful decline' – and why next year could be even tougherOpinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global marketsOpinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
-
Federal Reserve cuts US interest rates for the first time in more than four yearsPolicymakers at the US central bank also suggested rates would be cut further before the year is out
-
The debt ceiling illustrates America’s empire of debtOpinion The US has never quite got the hang of the conquering business as the debt ceiling debate shows.
-
US inflation falls to the lowest level in two yearsNews The rate of CPI inflation in the US slowed to its lowest rate since April 2021, suggesting the Federal Reserve’s rate hikes may be coming to an end.
-
Is US inflation accelerating again? Figures suggest the Fed has further to goNews The latest US inflation figures suggest inflation is not falling as fast as analysts had predicted. It could even be speeding up again.
-
Federal Reserve raises interest rates by 0.5%News The latest hike by the Federal Reserve takes the US benchmark rate to 4.25% - 4.5%.
-
US inflation drops to 7.7%News Costs for rents increased, but the price of cars, clothes and medical care helped slow the rate of inflation in the US
-
Federal Reserve hikes interest rates to 4%News The Federal Reserve continues its battle with inflation with another bumper interest rate hike.
-
US inflation remains higher than expectedNews US inflation fell by 0.1% but remains higher than expected due to the rising cost of food, shelter and medical care.
