Bridgewater Associates Founder Dalio Warns that the United States is in a Stagnation Inflation, Powell's Interest Rate Cuts Might Harm the Federal Reserve's Credibility.

Billionaire investor and founder of Bridgewater Associates, Ray Dalio, warned that the US economy has entered a stagflation environment. With inflation pressures still higher than the target and economic growth slowing, if the potential successor to the Federal Reserve Chairman, Jay Powell, chooses to cut interest rates, it would be a mistake and could damage the credibility of the Federal Reserve. Dalio stated on Monday that the US is clearly in a stagflation phase, and policymakers should be cautious rather than rushing to ease monetary policy. He pointed out that if Powell were to cut rates in the current environment, it could not only weaken market confidence in the Fed's ability to control inflation but also harm the central bank's reputation at a crucial moment. "Now is definitely not the time to cut rates," Dalio said. "Otherwise, the credibility will be lost, and the Fed will lose credibility. Especially at this stage, if you look at the monetary policies of other countries, you won't see them cutting rates. So there is no reason to lean towards a rate cut based on current information." Dalio's comments come at a time when the market is highly focused on potential changes in the leadership of the Federal Reserve. With current Chairman Powell's term expiring in mid-May, Powell is seen as the increasingly clear choice for succession. Meanwhile, rate market expectations also support keeping rates unchanged. According to the CME FedWatch tool, traders are currently betting with 100% probability that the Fed will maintain rates at this week's meeting, and federal fund futures show a high probability of maintaining a wait-and-see policy for the entire year. Market participants believe that Dalio's views highlight that the focus of current policy discussions has shifted from "when to cut rates" to "whether to continue maintaining high rates for longer". With sticky inflation, fiscal stimulus, and the continued boom in artificial intelligence investments, there are still doubts in the market about relaxing policy prematurely. In addition to monetary policy, Dalio also discussed asset allocation. He stated that despite the ongoing US-Iran war, the recent sharp rebound in the US stock market is rational, mainly supported by corporate earnings resilience. However, he also recommended allocating 5% to 15% of portfolios to gold and described gold as an "effective diversification tool."