DoubleLine Capital CEO Jeffrey Gundlach said an economic downturn will arrive next year, which could prompt the Federal Reserve to swiftly reverse its policy stance. "The effects of these rate hikes and the accumulation of quantitative tightening and draining of liquidity from the bond market [are] going to make 2023, in my view, probably a recessionary year," Gundlach said Monday during a DoubleLine investor webcast. To fight runaway inflation, the Fed has raised its short-term borrowing rate to a target range of 3.75%-4%, the highest level since January 2008. The central bank is widely expected to raise rates by 50 basis points this week. The so-called bond king thinks the Fed could have a policy pivot just weeks after economic indicators deteriorate further. Gundlach pointed to a policy reversal in 2019 when the Fed abandoned tightening and switched back to easing in three weeks. "I think the odds are probably greater than 75% that there's a rate cut in 2023," Gundlach said. "I think the pivot will be just as quick when they face the adversity, which is the effect of the policies, the tremendous interest rate increases that we've seen just in the past eight, nine months or so." Gundlach added that the quantitative tightening is a "huge liquidity drag," and it's happening when a number of leading indicators declined and the inverted yield curve flashed a recession alert. The widely followed investor said inflation could overshoot to the downside, given the magnitude of these jumbo rate hikes. At the September meeting, the Fed had penciled in a terminal funds rate around 4.6%. "If you have that kind of momentum on the downside, it's just not going to stop. Like you hit brakes on a car. You don't just stop in your tracks right there. You have momentum going," Gundlach said. "I think that if these policymakers follow through and the inflation rate has that momentum, I wouldn't be surprised if it went lower than what the forecasts are, at least temporarily." The consumer price index rose 0.4% in October and 7.7% from a year ago, less than expected. Inflation reading for November comes out Tuesday.