Bridgewater Associates Founder: Fed's 25 Basis Point Rate Cut is the "Right Move" for Creditors
Ray Dalio, the founder of the world's largest hedge fund Bridgewater Associates, stated that the Federal Reserve may cut interest rates slightly by 25 basis points, considering it the "right move" for creditors. He pointed out that the Fed needs to keep interest rates high to meet the needs of creditors while avoiding putting pressure on debtors. Dalio believes that there is not much difference in the long run between a 25 or 50 basis point rate cut, and policymakers need to focus on real interest rates to address the increasing debt
According to the financial news app Zhitong Finance, Ray Dalio, the founder of the world's largest hedge fund Bridgewater Associates, stated that the Federal Reserve may cut interest rates slightly this week based on the overall situation of the U.S. economy.
Dalio said in an interview in Singapore on Wednesday, "The Federal Reserve must keep interest rates at a sufficiently high level to meet the needs of creditors, so that they will get a real return, while not letting interest rates go too high to cause trouble for debtors."
During the 2024 Milken Institute Asia Summit, Dalio stated, "Whether it's 25 basis points or 50 basis points, if you look at the big picture, 25 basis points is the right thing to do. If you see the situation of mortgages getting worse, affecting more people, then it is possible to cut rates by 50 basis points."
Currently, the market generally expects the Federal Reserve to lower interest rates later on Wednesday local time after keeping borrowing costs at their highest level in 20 years for over a year. As officials seek to engineer a soft landing for the economy, investors and forecasters are divided on whether the Fed will cut rates by 25 basis points or 50 basis points.
However, Dalio believes that in the long run, the Fed's actions this week "make no difference." "I think it's a stupid bet - 25 or 50 basis points," he added, noting that policymakers ultimately need to keep real rates low to be able to repay the ever-increasing debt.
Dalio is not the only financial celebrity expressing conflicting sentiments about Fed policy. Jamie Dimon, CEO of JPMorgan Chase, stated that whether the Fed cuts rates by 25 basis points or 50 basis points, it "won't be earth-shattering."
Dimon said at a conference on Tuesday, "They need to do this." But "when the Fed raises or lowers rates, it's a small thing because behind it is the real economy."