The regional bank crisis will persist unless the Federal Reserve cuts rates, according to Jeffrey Gundlach. The DoubleLine Capital co-founder and chief executive told CNBC’s ” Closing Bell ” that despite comments from Fed chair Jerome Powell that the crisis has improved significantly, deposits will continue to flee. “These people are pulling money out because there’s absolutely reason to keep it in,” Gundlach said. “It just seems to me that the deposits are going to keep drifting out, I don’t think that this is the last chapter in this regional banking problem…I don’t really see what’s gonna make it stop unless the fed cuts interest rates.” “Leaving rates this high is going to continue this stress. I believe with a very high degree of probability there’s going to be further regional bank failures,” Gundlach said. But Gundlach says Powell’s comments Wednesday showed no sign that the Fed plans to cut rates in the near future and, as a result, recession odds have increased. The “storm clouds are much much denser than they were back in September, overall,” Gundlach said. To truly bring an end to the banking crisis, Gundlach says, the Federal Reserve must cut interest rates. He doesn’t believe the Fed will raise rates again in 2023 and, in fact, thinks the central bank may cut rates by as much as three quarters of a percentage point this year. “Powell was a lot more confident two press conferences ago than he was today,” Gundlach said. “In spite of the fact that we have commodities that are super weak…you would think he would have more confidence that inflation is coming down, but it just isn’t happening because services inflation is just so high.”
