Ray Dalio Warns Fed Rate Cut In September Could Trigger Stagflation Risk

The billionaire investor predicts a weaker dollar, a steeper yield curve, and stocks doing relatively poorly despite the easing.

Billionaire investor Ray Dalio warned on Thursday that a September rate cut by the Federal Reserve, despite elevated inflation, could deepen risks of stagflation.

“I fear that short-term rates and the dollar will go down, especially relative to gold, long-term interest rates will rise a bit, so the yield curve will become steeper, and stocks will do relatively poorly despite the easing,” Dalio wrote during an Reddit AMA, adding that such a shift would signal investors wanting to rotate out of debt into alternative stores of wealth. He said that the move would also indicate that the Fed is “in a bind” and that the risk of stagflation was rising.

The dollar index (DXY) has declined by more than 2% so far this year and by nearly 10% over the past 12 months. Meanwhile, the SPDR Gold Shares (GLD) have gained 33% this year and more than 40% over the past 12 months. 

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