Bill Gross: Fed Will Raise Rates, If Only To Prove They Can
The Federal Reserve released its FOMC statement on Wednesday in which it remarked that the slowdown in the U.S. economy is due to transitory factors.
Problems In Objectives
"I think they are going to raise rates once in 2015, if only because they want to prove that they can do it," Gross said.
"But, certainly as evidenced by their statement today, although they are talking about transitory and they are talking about return to normal growth rates and potentially a 2 percent inflation rate, I think they have problems in terms of those objectives.
"I noticed one important thing, and most newscasts and most news dailies don't print this at all, that the real final sales number, absent inventories, was a -0.5 percent. And so this 0.2 percent growth, while very anemic, it certainly is not as anemic as real growth, real final sales without inventories."
Gross continued, "I think that's going to have an effect in the next quarter and the next quarter after that. So, 2 to 3 percent growth going forward, problematic in my opinion."
Is The Data Real?
On the data released by the Fed being affected by weather conditions, lower oil prices, etc. Gross said, "Let's acknowledge some of the conditions. Let's acknowledge lower oil prices in terms of investment. Let's acknowledge the weather in terms of consumption. Let's acknowledge all of those things.
"Then the question becomes, 'How transitory is the real economy?'
"And I would add to that in terms of the negative that the real economy is affected by very long-term structural issues in terms of demographics, in terms of high debt levels, in terms of the influence of technology on job creation, which is negative as opposed to positive. And these are the things that the Fed doesn't want to model. It doesn't fit neatly into their tailored rule," Gross concluded.
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