Bridgewater Associates, the world’s largest hedge fund, told clients that the Federal Reserve is making a mistake by raising interest rates. This according to a recent article in Business Insider.
In a recent client note co-written by Bridgewater founder Ray Dalio, the firm outlines five arguments against further rate hikes:
- “There is not nearly enough inflation and overheating risk to make concerns about inflation and overheating performance of paramount importance.”
- “It’s tougher to reverse an economic and market decline with an easing than it is to reverse an economic or market acceleration with a tightening,” the note states.
- “Tightening at rates that are faster than are built into the yield curve is likely to trigger negative wealth effects because the effective durations of assets are now very long.”
- “Economic sensitivities to interest rate changes are greater than normal because the level of global indebtedness and non-debt obligations…in dollars and other currencies is high…”
- “A downturn in the economy would be intolerable to those with lower incomes and wealth, and would make social and political tensions dangerous.”