Ray Dalio: Expect more QE

published 25 September 2015

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."