Musk, Wood and Gundlach warn of the risk of deflation due to the actions of the Fed

Elon Musk is not happy with the actions of the Fed, and while the market is beginning to consider the possibility of raising the rate by 1% at the Fed meeting next week. The head of Tesla (NASDAQ:TSLA) believes that it would be a good idea for the Fed to start cutting rates now.

Responding on Twitter (NYSE:TWTR) to another user’s question about “what the Fed should do,” Elon Musk tweeted “cut [rate] by 0.25%.”

He made his position clear last week when he said that another “big rate hike by the Fed is fraught with deflation.”

And Musk is not alone in his opinion that the Fed’s decision to fight inflation could lead to a worse situation than it is now.

Prominent ETF chief Kathy Wood also warned of the risk of deflation this week.

“Deflation is on the way,” she tweeted on Monday, quoting Elon Musk.

Well-known investor Jeff Gundlach agrees, warning on Tuesday of the risk of deflation by advising investors to buy long-term Treasury bonds.

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Gundlach, also known as “the king of bonds,” said the Fed must continue raising rates by 25 basis points next week or risk sending the economy into a tailspin. He added that the central bank is not yet able to assess the impact that previous increases have already had.

“Despite the fact that today they say the exact opposite, the risk of deflation is much higher than in the last 2 years,” Gundlach said Tuesday at the Future Proof FestivaI.

“I’m not talking about next month. I’m talking about it happening a little later next year, definitely in 2023,” he said.

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