Policy makers are unlikely to raise borrowing costs in 2012, with benchmark rates to stay at or near zero in the U.S. and Europe, according to Pacific Investment Management Co.’s Mohamed A. El-Erian.
Pimco advises investors stay in the five- to nine-year range in bonds for safety and to earn income, El-Erian, chief executive and co-chief investment officer of the world’s biggest manager of bond funds, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.
“You’ll see policy rates in the U.S. and Europe floored at or near zero,” Newport Beach, California-based El-Erian said in the interview. “I don’t think there will be any appetite or need to raise interest rates in the U.S. and Europe.”
The Federal Reserve has said it will keep its target rate for overnight loans between banks between zero and 0.25 percent through mid-2013, and is now selling $400 billion of its short-term Treasurys and reinvesting the proceeds into longer-term government debt in a program traders dubbed Operation Twist.
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