Bill Gross Argues Higher Rates are Good for the Economy

Near-zero interest rates aren’t good for the economy in the long run, bond guru Bill Gross said Wednesday.

That’s because low rates hinder the ability of savers to earn a return on their money, and that impedes investment, he said.

“Capitalism can’t really thrive,” the manager of the Janus Global Unconstrained Bond Fund said in an interview with CNBC’s “Power Lunch.”

“Ultimately in terms of real economic growth, an economy needs certainly a positive interest rate and maybe even a close to positive real interest rate in order to function normally,” he said.

On Wednesday, the Federal Reserve opted to not raise interest rates, instead keeping its overnight rate target in the 0.25 percent to 0.5 percent range.

However, the central bank noted the labor market has strengthened and said other indicators were pointing to growth.

Gross believes the Fed is dividend.

“I think some of the Fed are beginning to believe, as I’ve suggested for the past several years, that interest rates at near-zero percent levels have a negative affect at some point on the real economy.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza