Bridgewater’s Arguments Against Fed Rate Hikes

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:

  1. “There is not nearly enough inflation and overheating risk to make concerns about inflation and overheating performance of paramount importance.”
  2. “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.
  3. “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.”
  4. “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…”
  5. “A downturn in the economy would be intolerable to those with lower incomes and wealth, and would make social and political tensions dangerous.”