Tags: Gross | Fed | considerable | rate

Gross: Fed Was Correct to Leave 'Considerable Time' Phrase in Statement

By    |   Wednesday, 17 September 2014 03:09 PM

The big hullabaloo before the Federal Open Market Committee (FOMC) meeting that ended Wednesday concerned whether the Fed would drop the words "considerable time" from its assessment of how long it would likely leave the federal funds rate target at its record low after quantitative easing ends.

The FOMC left the words in its policy statement, and star bond fund manager Bill Gross, chief investment officer at Pimco, believes that was a good move.

"I think they need a considerable time because of the rest of the world. [While] the Fed is not in charge of the rest of the world, we are the reserve currency, and what we do dictates a lot in terms of economic growth and interest rates everywhere else," he tells CNBC.

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"What we see in the rest of the world is a mild deflation. We see that Japan and South America are in recession, and we see in the United States that the core CPI [consumer price index] has come down to 1.7 percent."

The government reported Wednesday that consumer prices also rose 1.7 percent in the 12 months through August, compared with 2 percent in the 12 months through July.

"If I were a Fed number I would say we are closer to disinflation than inflation. We may have not only a considerable period of time but a significant period of time before rates should be raised," Gross adds.

The clear message from the Fed is that it's in no rush to increase interest rates.

"They want to let the market know they are not ready to raise rates anytime soon," John Silvia, chief economist at Wells Fargo Securities, tells Bloomberg.

"Inflation is buying them time to do nothing. Inflation is running below expectations so they don't need to" indicate tightening, he notes.

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The big hullabaloo before the Federal Open Market Committee (FOMC) meeting that ended Wednesday concerned whether the Fed would drop the words "considerable time" from its assessment of how long it would likely leave the federal funds rate target at its record low after quantitative easing ends.
Gross, Fed, considerable, rate
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2014-09-17
Wednesday, 17 September 2014 03:09 PM
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