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Gundlach: Central banks don't understand their policies—and 'they're out of control'

Central banks are "out of control" because they don't understand the consequences of their own policies, according to Jeffrey Gundlach, the chief executive officer at DoubleLine Capital.

Speaking with CNBC's "Halftime Report" on Friday, the bond guru projected that markets are actually likely to see another round of negative interest rates before central bankers realize they aren't working and that fiscal stimulus may be the better option.

"The policies that they're implementing don't have the consequences that they're looking for," he said.

Chief among those policy mistakes, Gundlach said, is negative rates.

"When you go to negative interest rates, you do not stimulate consumption, you necessitate saving," Gundlach said. "You cannot fight deflation with deflation. Negative interest rates are the definition of deflation."

"You cannot put out a fire by pouring gasoline on it," he added.

Central bankers will probably still believe in negative interest rates for some time, but will come to the conclusion that "they just haven't done enough of it," Gundlach projected.

Eventually, however, those bankers will figure out the actual consequences of their policies, and call for fiscal stimulus: "When that comes, that's when the game will change," Gundlach said.

Still, the Federal Reserve has actually gained "a little bit" of credibility this week by "at least acknowledging reality" about tepid U.S. economic growth, he said.

This week, the Fed appeared to signal that the current state of affairs is likely as good as it's going to get for the country.