Tags: Pimco | Gross | Fed | Hold | Rates

Pimco's Gross: Fed to Hold Rates for at Least a Year

By    |   Friday, 04 Feb 2011 07:57 AM

The Federal Reserve won’t raise interest rates for at least another year, thanks to the stubbornly high unemployment rate, says star bond-fund manager Bill Gross.

Unemployment stood at 9.4 percent in December. The federal funds rate has rested between zero and 0.25 percent since December 2008.

In an interview with CNBC, Gross, who is chief investment officer of Pimco, focused on a line uttered just before by Federal Reserve Chairman Ben Bernanke.

"We will require a sustained period of stronger job creation before recovery can be considered established," Bernanke said.

"I'll take that one step further and say the Fed will not raise interest rates unless the recovery is considered established," Gross says.

"He's looking at job creation, looking at the unemployment rate. Would an 8 percent unemployment rate cause the Fed to raise interest rates? Perhaps, but we're far from that at this point."

To be sure, inflation, which registered 1.5 percent last year, is headed higher thanks to commodity price increases, Gross says.

Still, other economists agree with him that a spike in inflation is unlikely to result in a Fed tightening anytime soon.

"We very well could get inflation that the Fed doesn't care about, but the market does," Michael Pond, managing director and co-head of U.S. rate strategy at Barclays Capital Research, tells Dow Jones.

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The Federal Reserve won t raise interest rates for at least another year, thanks to the stubbornly high unemployment rate, says star bond-fund manager Bill Gross. Unemployment stood at 9.4 percent in December. The federal funds rate has rested between zero and 0.25 percent...
Pimco,Gross,Fed,Hold,Rates
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2011-57-04
Friday, 04 Feb 2011 07:57 AM
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