Ray Dalio is advising Kevin Warsh to do the exact opposite of what Donald Trump expects of his nominee for chairman of the Federal Reserve (Fed, the central bank of the United States): not to cut interest rates.

The acclaimed American investor, founder of Bridgewater Associates , which has approximately US$136 billion in assets under management, said it would be a mistake for Warsh to loosen monetary policy considering that the United States is in a period of stagflation.

According to him, persistent inflationary pressures, coupled with slowing growth, create a scenario that demands caution from the monetary authority.

“We are certainly in a period of stagflation,” Dalio said Monday, April 27, in an interview with CNBC . “Because of the problems that exist, in terms of more immediate inflation, which is further from the target.”

Dalio stated that a rate cut in this scenario would damage market confidence in the Fed and, consequently, in Warsh, who is expected to assume the chairmanship of the monetary authority in place of Jerome Powell in mid-May.

“Interest rates shouldn’t be cut now,” Dalio said. “You’ll lose credibility. The Federal Reserve would lose its credibility, especially now. If we look at the monetary policies of other countries, we don’t see cuts. So, whatever the benchmarks are, there will be no inclination to cut rates, not with the information available today,” he said.

Warsh will take over the Fed having to deal with pressure from Trump for interest rate cuts and demands for independence, without yielding to political pressure.

Currently, the consensus indicates that the Fed should keep interest rates at their current level at this week's meeting, currently set in the range of 3.50% to 3.75% per year, with the market expecting them to remain unchanged until the end of the year.

Trump announced the choice of Warsh at the end of January, after spending the last few years criticizing Powell, despite having nominated him to head the Fed in his first term in 2018.

The US president is lobbying for an interest rate cut, calling Powell an "idiot and stubborn" for his more cautious stance. He has already made clear what he expects from the next Fed chairman: "Anyone who disagrees with me will never be chairman of the Fed!", Trump wrote in a social media post in December, when he was considering candidates.

Warsh, 55, served as a Fed director between 2006 and 2011, playing a crucial role behind the scenes in Washington's 2008 bailout of Wall Street .

Throughout his career, he built a reputation for being tough on inflation and critical of liquidity injection measures by central banks.

The big question is whether this stance will be maintained, considering it's a Trump nomination, after spending the last few years courting the president to secure the nomination.

Despite his hawkish history, observers point out that he has been showing more alignment with Trump. In December, in an indication that he was inclined to appoint Warsh as chairman of the Fed, Trump said that Warsh "believes we should have lower interest rates."