Treasury Market Signals Fed Must Act on Inflation

Jeffrey Gundlach, CEO of DoubleLine Capital, believes the Treasury market is signaling that the Federal Reserve needs to take more decisive action to meet its 2% inflation target. Gundlach made his comments on CNBC's 'Closing Bell' following the Fed's latest policy decision, which left the benchmark interest rate unchanged at a range of 3.5% to 3.75%. The move was widely expected, but not unanimous, as three policy members voted in favor of raising rates by a quarter percentage point.

Gundlach pointed out that the divergent moves across the Treasury curve after the announcement showed investors' skepticism about the Fed's commitment to its inflation target. He noted that the two-year Treasury rallied due to expectations that the Fed is taking its time, while the long bond yield rose significantly in response to the market's demand for action.

The benchmark 10-year Treasury yield surged by more than 7 basis points to 4.681%, with the 30-year bond yield reaching its highest level since 2007 at 5.213%. Fed Chairman Kevin Warsh emphasized that the Fed will take necessary steps to meet its inflation goal, but stressed that decisions by the committee matter and they will not hesitate to act if necessary.