Tags: Gross | fed | funds | 2016

Pimco's Gross: Fed Rate Will Stay at Record Low Until 2016

By    |   Wednesday, 18 December 2013 07:25 PM

The Federal Reserve will keep its federal funds target rate at a record low of zero to 0.25 percent at least until 2016, predicts Bill Gross, co-chief investment officer at Pimco.

Most attention has focused on the Fed's decision Wednesday to taper its quantitative easing by $10 billion a month.

But in its statement announcing that move, the Fed said, "It likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent."

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That sets a higher hurdle for a rate increase than the Fed's October statement, which said, "this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent."

Gross' takeaway on the issue: "I think the policy rate, which is the important consideration here now that taper is under way, will be firm at 25 basis points until at least well into 2016," he told CNBC.

As for the tapering, the Fed is trimming its bond buying to $75 billion a month from $85 billion.

"The Fed exit has begun, and the economy will guide how quickly they continue to cut back their stimulus," Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York, told Bloomberg.

"They changed the direction of policy today, and once they started this step, history tells you, they won’t reverse it."

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The Federal Reserve will keep its federal funds target rate at a record low of zero to 0.25 percent at least until 2016, predicts Bill Gross, co-chief investment officer at Pimco.
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Wednesday, 18 December 2013 07:25 PM
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