Bridgewater: "Inflation War Not Over... Fed Will Not Lower Interest Rates"

Bob Prince Bridgewater CIO
"Inflation to Remain at Current Levels... Too Early for Interest Rate Cuts"

The U.S. Federal Reserve's (Fed) war on inflation is not over yet, and warnings have been issued that it is premature to discuss the possibility of interest rate cuts next year.

Bob Prince, Co-Chief Investment Officer (CIO) at Bridgewater Associates

Bob Prince, Co-Chief Investment Officer (CIO) of Bridgewater Associates, the world's largest hedge fund, stated in an interview with major foreign media on the 13th (local time), "The Fed will not cut interest rates."

He analyzed, "Although inflation has decreased, it is still too high," adding, "It is likely that the inflation rate will remain at the current level." He further predicted, "Rising energy prices and strong wage growth pose a significant risk of an inflation rebound."

Last month, the U.S. Consumer Price Index (CPI) rose 3.0% year-on-year, the lowest level in two years and three months. However, it remains above the central bank's target of 2%, and there is a high probability that the inflation rate will persist at the current level for a long time. Prince, CIO, expected that the U.S. core CPI inflation rate will likely form a bottom around 3.5-4% for the time being. This could lead to further monetary tightening by the Fed.

He predicted, "Despite market expectations for rate cuts, the Fed can maintain rates steadily."

Foreign media evaluated this statement as completely dousing the market's expectations for the end of tightening. Currently, the U.S. interest rate futures market expects the Fed to raise rates by an additional 0.25 percentage points from the current 5.0-5.25%, then cut rates back down to around 3.8% by November next year. In particular, expectations for a pivot (a change in monetary policy direction) have spread as the U.S. June CPI inflation rate slowed.

Prince, CIO, emphasized, "The Fed will not cut rates as quickly as the market expects," adding, "It is not a good environment to hold assets in bonds or stocks. Holding cash is an attractive alternative right now." He also stated, "Bridgewater is aligning its investment portfolio with the tightening cycle," taking a cautious stance on risk assets.

This content was produced with the assistance of AI translation services.