FX.co ★ US interest rates could peak at 5% next year

Billionaire and DoubleLine Capital CEO Jeffrey Gundlach said he believes the Fed will raise interest rates by another 50 basis points in February, which could make it peak at 5% next year. However, the central bank won't be able to hold it at that level as they will be forced to cut it.

"You get to 5%, repeat that, then think the market will start to fall," he said. "The bond market expects the federal funds rate one year from now to be the same as that at the December meeting, which makes me wonder why bother with these hikes at all?".

Gundlach also warned that the Fed might not make it to 5% because the data is "weakening too quickly".

Meanwhile, Gainesville Coins precious metals expert Everett Millman said such a rapid Fed rate hike is usually not conducive to stable policy. "The US economy will fluctuate a lot because of this," he said. "I think the pause in rate hikes will come sooner than predicted. The damage will be more obvious next year," Millman added.

The Fed always works with hindsight, which makes its job much more difficult. "It's hard for them to see problems in the economy until it's too late. They can bring the rate up to 5% because they want to create the illusion that they are coping with inflation," Millman noted.