Bill Gross reckons that the US Federal Reserve will NOT raise interest rates.
In article on CNBC, Gross states the following reasoning.
- I don't think so,” he said when asked if he foresees a rate hike. "The concerns about inflation have got to be coming down ... with oil prices down maybe 25 percent from the peak. Other commodity prices, gosh, gold down 20 percent, silver down 10 percent today alone ... Those at the helm, so to speak, have to be observant of what's happening in the commodities sector, and that's been the biggest push in terms of inflation for the past six to 12 months."
Though he sees uncertainty in the bond sector, Gross remain optimistic about the rest of the quarter.
“I think the third quarter will be fine based on some technical adjustments with inventory and continued strong trade. But the fourth quarter and the first quarter of 2009 do not look good—it is all dependent upon housing prices.”
Additionally, Gross said he's uncertain about when the housing market will hit bottom. As prices keep going down, he said, financial institutions need to continue raising capital, which complicates the economic outlook.
“As the capital is raised, it raises interest rates and it stretches risk premiums and it forces asset sales, which perpetuates the cycle,” he said. “We need a new balance sheet to provide new capital and funds for the housing markets and the financial sectors.”
Source: http://www.cnbc.com/id/26225842
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