Jeffrey Gundlach says the bond market is telling Warsh the Fed has to start acting on inflation

Jeffrey Gundlach's comments highlight a growing concern among bond investors that the Federal Reserve may not be taking inflation seriously enough. The bond market is a key indicator of inflation expectations, and Gundlach's observation that the Treasury curve is showing divergent moves suggests that investors are increasingly skeptical about the Fed's ability to manage inflation.

This skepticism is significant because it can influence the Fed's decision-making process. If bond investors believe that the Fed is not taking inflation seriously enough, they may adjust their expectations and demand higher yields to compensate for the perceived risk. This can lead to a tightening of financial conditions, which can, in turn, impact the broader economy. The Fed has been emphasizing its commitment to keeping inflation in check, but Gundlach's comments suggest that some investors are not convinced.

To watch next: The Fed's upcoming policy meeting and any signs of how it plans to address inflation concerns. Also, keep an eye on long-term Treasury yields and the shape of the yield curve, as these will provide further clues about investors' inflation expectations and their confidence in the Fed's ability to manage the economy. Any significant changes in market expectations could have implications for the broader financial markets and the economy.

Originally reported by cnbc.com. BondNews adds analysis for finance & markets readers.