Bill Gross: 50-50 chance Fed raises rates
Bill Gross, head of investment firm Janus Capital, believes there is a 50 percent chance the Federal Reserve will raise interest rates later this month.
But Gross said Friday it would probably be a mistake for the central bank to raise rates in their Sept. 16-17 meeting, considering turbulent global financial conditions and concerns about pushing the U.S. economy toward deflation.
“I’m a person that is more persuaded that deflation is a greater fear than inflation,” he told Bloomberg Radio.
{mosads}“It seems farcical to me to raise interest rates in the face of 2 percent growth and less than 1 percent inflation and a strong dollar and turmoil in the global markets with commodities and emerging markets and so on,” Gross added.
He argued Federal Reserve Chairwoman Janet Yellen is probably most concerned about shaky global financial conditions in trying to determine whether now is the right time to raise rates.
“I think she thinks that growth is fine, that unemployment is pressing limits and inflation ultimately will move to 2 percent,” he said.
Gross said he thinks any central banker is “well aware that there are significant imbalances in the global economy.”
Bubbling global concerns aside, Gross said Fed policymakers are probably itching to make a move.
If they do make a move this month — the Fed’s next chance is in December — Gross said he thinks the Fed is “one-and-done for six months.”
“I think that’s all they can do,” he said. “And if any other language pops up, then you’re going to see more volatility.”
He said the recent instability in the markets make it more difficult to raise rates now.
“There certainly is speculative fervor in markets and a lack of liquidity,” Gross said.
“You can’t leave for the bathroom and come back without the market having moved by 1 percent up or down,” he said.
“And that, to me, indicates that markets are certainly not stable or steady. They may not be overpriced necessarily, but they are volatile … and the volatility itself is something that they want to zero in on.”
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