Tags: Pimco | El-Erian | More | Fed | Easing | Won’t | Help

Pimco's El-Erian: More Fed Easing Won’t Help Much

Thursday, 07 Oct 2010 09:06 AM

The U.S. Federal Reserve is planning more quantitative easing — boosting money supply via bond purchases — to kick-start economic growth, but it probably won’t help very much, says Mohamed El-Erian, co-CEO at Pimco, the world’s largest bond fund.

High unemployment and a weak housing market will keep economic recovery sluggish no matter what monetary authorities attempt to spark more robust growth.

Plus investors, who have been snapping up asset classes hoping quantitative easing will help, may bail if the Fed’s future moves fail to produce lasting effects, El-Erian tells CNBC.

“Equity prices at these levels assume an effective policy response. Effective means it will impact the real economy,” El-Erian says.

“Where you end up fundamentally depends on your vision of the economy.”

While the U.S. economy has officially been recession-free for over a year now, high unemployment rates make it seem like the recession is dragging on for many Americans.

A report issued by human resources giant ADP said U.S. private employer payrolls fell by 39,000 jobs in September, way off from median forecast published by Reuters calling for an increase of 24,000 jobs.

A nonfarm payrolls report due soon should show zero growth in September from August due to U.S. Census workers leaving their temporary jobs, while layoffs at state and local governments offset a slight pickup in private hiring, according to Reuters.

“This does not bode particularly well for private sector employment,” Steven Wood, chief economist at Insight Economics in Danville, California, tells Reuters.

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The U.S. Federal Reserve is planning more quantitative easing boosting money supply via bond purchases to kick-start economic growth, but it probably won t help very much, says Mohamed El-Erian, co-CEO at Pimco, the world s largest bond fund. High unemployment and a...
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2010-06-07
Thursday, 07 Oct 2010 09:06 AM
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