Tudor Jones predicts Fed will not hike rates in 2019 after raise in December

Key Points
  • Billionaire investor Paul Tudor Jones says the Federal Reserve will approve a rate hike at its meeting next week then likely pause.
  • Deflationary pressures, particularly from commodity prices, will negate the need for future hikes, the hedge fund manager tells CNBC.
Billionaire Paul Tudor Jones sees no rate hikes in 2019
Billionaire Paul Tudor Jones sees no rate hikes in 2019

The Federal Reserve will go ahead with its planned rate hike next week and then stop, hedge fund manager Paul Tudor Jones said Monday.

With the central bank just nine days ahead of another quarter-point increase in its benchmark rate, the Tudor Investment founder said current conditions will stand in the way of more increases anytime soon.

"The one thing I would say is there's a high probability that this hike, assuming they hike, will be the last one for a long time," Jones told CNBC's Andrew Ross Sorkin during a "Squawk Box" interview.

Using the Goldman Sachs commodity index as a baseline, Jones said prices are down 15 percent over the past 40 days. That gives the Fed no impulse to rate rates, he added.

"Never in the history of the Fed have we had that kind of deflationary impulse eight days before a hike," he said.

Markets largely agree with that call.

Though fed funds futures, which are tied to the central bank's overnight benchmark rate, recently had been pricing in two increases for 2019, that has changed. The market still agrees that the policymaking Federal Open Market Committee will move ahead with an increase next week, but sees a slightly less than 50 percent of a move anytime in the year ahead.

The recent stock market sell-off, coupled with worries about global growth and the intensifying trade impasse between the U.S. and China, have translated into tightening financial conditions and more dovish monetary policy expectations.

Billionaire investor Paul Tudor Jones: Fed won't hike rates in 2019
Billionaire investor Paul Tudor Jones: Fed won't hike rates in 2019

Despite the growing pessimism, Jones said the Fed is locked into a hike at the Dec. 18-19 meeting.

"There's so much momentum, and central bankers by definition are so conservative. For them to change that quickly would require this unbelievable change in mindset," he said.

That will add to the wild stock market swings he sees ahead.

Earlier in the interview, Jones said he expects swings in the market of up to 15 percent in both directions ahead. He said he would "buy the hell out of" a downturn that could come with the drop, and expects the upswing will come after the Fed indicates that it will pause.

The Fed began raising rates in December 2015 after holding the funds rate near zero for seven years. A series of increases, the most recent of which came in September, has taken the rate to a range of 2 percent to 2.25 percent. The FOMC has indicated it plans to hike three times in 2019, though that forecast could change at this month's meeting when members revisetheir economic and rate forecasts.

Jones is known for making big calls on the market, including correctly predicting the 1987 stock-market crash.

However, the billionaire investor told CNBC on July 12 that to end 2018. That call has yet to pan out as the S&P 500 is down more than 1 percent for the year and has plummeted more than 10 percent since hitting an all-time high on Sept. 21.