Bridgewater Associates founder Ray Dalio explains why he agrees with Fed chair Janet Yellen’s decision to wait until the U.S. sees more inflation before raising interest rates.
Ray Dalio head of the world's biggest hedge fund, told CNBC on Wednesday the FED should wait for signs of inflation before it raises interest rates.
Fed Chair Janet Yellen's cautious bearing to winding down easy monetary policy has been the correct approach, the Bridgewater Associates founder on "Squawk Box." Dalio's firm manages $163 billion overall, including nonhedge fund money.
"If I were running monetary policy, I'd wait to see for the whites of the eyes of inflation," he said, because the Fed should not be ahead of market expectations on increasing rates. The first hike is expected in the summer, though some market watchers think it may be earlier.
Looking at the markets, Dalio said, "the prospective return of asset classes, it's very narrow." He predicted expected returns of equities of "only about 4 percent."
Dalio did express optimism about the prospects for the U.S. in the near-term. "I see no real reason for a problem in the United States now other than too tight ... monetary policy. And I don't think you'll get to too tight of monetary policy."
Besides the Fed, Wall Street will be watching the European Central Bank's Thursday meeting, when the ECB is expected to detail its asset-backed purchase program—just as the U.S. central bank gets ready to end its bond-buying this month.
What happens this month or even in the next year are not big worries for Dalio. "My real concern is when the next downturn comes, which probably won't be for another couple of years ... 18 months," he said.
Ray Dalio is an American businessman and founder of Bridgewater Associates. Bridgewater Associates has since attracted many clients including pension funds and is currently (as of January 2012) the largest hedge fund in the world with nearly $120 billion under management.