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Dalio Warns Warsh Against Rate Cuts as Stagflation Pressures Build

The timing underscores worries that a cut with inflation still high would undercut Fed credibility.

Ray Dalio has a stagflation warning for the US economy.
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Overview

  • Dalio, speaking on CNBC Monday, said the U.S. is in a stagflationary period and cautioned likely Fed successor Kevin Warsh that cutting rates now would be a mistake.
  • Traders price a 100% chance the Federal Reserve holds policy at this week’s meeting, with futures pointing to little change for the rest of the year, according to CME FedWatch.
  • Warsh is widely reported as on track to replace Jerome Powell in mid-May as President Donald Trump keeps pressing for lower rates, raising the stakes for the Fed’s standing with markets.
  • Recent data show inflation running above the 2% goal, including headline PCE at 2.85% in February, while growth has cooled and energy costs tied to the Iran conflict add supply-driven price pressure that monetary policy cannot easily fix.
  • Dalio recommended a 5% to 15% allocation to gold as a portfolio hedge, calling it an effective diversifier in a slow-growth, high-inflation backdrop.