Tags: Pimco | Gross | Fed | Rates

Pimco's Gross: Fed Won't Raise Rates for a Long Time

Monday, 01 Mar 2010 09:31 AM

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Pimco’s Bill Gross said low interest rates are here to stay despite the Fed’s latest move.

“This is the Fed's version of Groundhog Day. .... We saw the shadow: We have at least six more months of zero-degree interest rates,” he said.

Gross, who runs the largest bond fund in the world, told CNBC that the Fed’s decision to increase the discount rate by a quarter point is a move to placate other Fed board members concerned about inflation.

“The timing was a little unusual and surprising. I think it was really a move to appease the three or four hawks on the Fed. They've had their moment and now we'll continue to see this type of spread and this type of Fed funds level going forward,” he said.

Gross predicts that the Fed will not touch the funds rate since the unemployment rate remains high. Employment will not get better until 2011, he said.

“All the market needs is a continuing of the existing (rates) to make lots and lots of money,” Gross said.

Federal Reserve Bank of San Francisco President Janet Yellen said the economy needs lower interest rates to bolster a strong comeback, Bloomberg reported.

“When the day comes to start raising rates again, we have tools at the ready. For the time being, the economy still needs the support of extraordinarily low rates,” Yellen said in a recent speech in San Diego.

Hiking interest rates will not help the U.S. economy rebound, she said.

“This is not the time to be tightening monetary policy. But eventually the economy will gain enough momentum and won’t need today’s extraordinarily low interest rates,” Yellen said.

Yellen said the Fed’s increase of the discount rate is not the “the first of many steps,” regarding raising interest rates.

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