Bridgewater's Dalio says U.S. economy too fragile for rate hikes

NEW YORK (Reuters) - The economic environment is too fragile for the Federal Reserve to raise interest rates this month, Ray Dalio of Bridgewater Associates, one of the world’s largest and most closely watched hedge fund investors, said on Tuesday.

Ray Dalio, Chairman and Chief Investment Officer, Bridgewater Associates attends the session 'Where Is the Chinese Economy Heading?' of the annual meeting of the World Economic Forum (WEF) in Davos, Switzerland January 21, 2016. REUTERS/Ruben Sprich

“The risks are so much more on the downside,” Dalio, chairman and co-chief investment officer of the $150 billion Bridgewater, told the CNBC Institutional Investor Delivering Alpha Conference in New York.

Dalio disagreed with J.P. Morgan Chief Executive Jamie Dimon, who said recently the U.S. central bank should raise rates sooner rather than later.

“That’s wrong,” Dalio said.

Dalio, speaking alongside former Secretary of the Treasury Timothy Geithner, acknowledged that the Fed, like other central banks, has little room to maneuver in future recessions given interest rates that are already near zero.

“If you have a downturn and you don’t have that power - we’ve never been in a world that’s been like this,” Dalio said.

Dalio said a realistic economic growth rate in the United States would be about 1.5 to 2 percent.

On China, Dalio praised what he called highly capable leaders that would be able to manage through the restructuring of its debt, economy and capital markets.

“I’m not saying it’s not challenging but the idea that it’s going to blow up ... is a very exaggerated notion,” Dalio said.

Dalio also weighed in on the U.S. presidential election, saying the current populism of the race scared him because of its extremism in the face of complicated issues.

“Calm down and make sure you understand how the economic machine works,” he said when asked what he would tell Republican nominee Donald Trump over a hypothetical Thanksgiving dinner. “Be open-minded.”

Bridgewater’s flagship hedge fund, Pure Alpha, is down about 9 percent this year through Sept. 9, according to a person familiar with the situation.

But Bridgewater has attracted $22.5 billion in net new client money since 2015, according to the same person. The figures were first reported by the Financial Times and Bloomberg.

(This version of the story has been refiled to fix dropped “it’s” in paragraph 9 letter in word “works,” paragraph 11)

Reporting by Lawrence Delevingne; Editing by James Dalgleish and Dan Grebler