Market Overview

Bill Gross, Mohamed El-Erian: 2016 Fed Rate Hike Still Likely

Bill Gross, Mohamed El-Erian: 2016 Fed Rate Hike Still Likely

The Labor Department reported the weakest U.S. payrolls number in seven months in April, but some experts believe that a softening labor market may not be enough to deter the Federal Reserve from raising interest rates.

Bill Gross, who runs the Janus Global Unconstrained Bond Fund, still believes a rate hike is on the table as soon as June.

“Yellen, more than jobs, is focused on wages,” Gross said. “At 2.5 percent, they’re moving up.”

Related Link: Weakest Jobs Report In 7 Months Puts Rate Hike At Serious Risk

Last week, Alianz Chief Economic Adviser Mohamed El-Erian told Benzinga that he believes the latest jobs numbers have likely make the market skeptical of a June hike.

“The below-consensus monthly employment creation of 160,000 and the downward revisions of 19,000 to prior estimates are offset by a pickup in wage growth and lower long-term unemployment,” El-Erian said.

“Given this tug of war, the markets could well revisit their initial reaction of sharply reducing the probability of a 2016 interest rate hike by the Federal Reserve.”

Regardless of the market’s take on the impact of the jobs number, El-Erian told Bloomberg that the Fed will likely still raise interest rates at least once in 2016.

“I do think they’ll hike at least once, and they could hike twice this year,” he said.

Since the jobs report was released on Friday morning, the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 0.6 percent.

Disclosure: The author holds no position in the stocks mentioned.


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