Jeffrey Gundlach, founder of Doubleline Capital.

(Reuters file photo)

[Financial Channel/Comprehensive Report] Jeffrey Gundlach, founder of Doubleline Capital, known as the "new debt king" on Wall Street, said on Monday (27th) that the U.S. economy is expected to emerge within a few months. A recession would require a "very dramatic" response from the Federal Reserve.

In an interview with "CNBC", Gundlach said that economic headwinds are forming, and this topic has been discussed for some time. Gundlach believes that the economic recession will come within a few months, and all that is really needed is an increase in the unemployment rate.

Gundlach also expects the Fed to cut interest rates several times this year and overall economic conditions are significantly weaker.

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U.S. Treasury yields surged amid a brighter outlook for U.S. banks, with traders predicting a more likely 1-quarter (0.25 percentage point) rate hike by the Fed at its May policy meeting.

Gundlach said that if the Fed raises rates again in May, the difference between what an investment can still get from Treasuries and what it can get from the banking system will widen.

Gundlach warned that such a situation would lead to a significant shrinkage of liquidity in the banking system, which could lead to more losses.

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