Gross Critical of Low Interest Rates

Closely watched bond investor Bill Gross criticized ultra-low interest rates on Monday, saying they could harm global growth instead of boosting it in the way that many central banks intend.

“Low interest rates globally destroy financial business models that are critical to the functioning of modern day economies,” Gross, who oversees the Janus Global Unconstrained Bond Fund (JUCAX.O), wrote in his monthly investment outlook.

“Negative/zero bound interest rates may exacerbate, instead of stimulate, low growth rates … by raising savings and deferring consumption,” he wrote.

 
He said pensions funds and insurance companies were particularly “threatened by low to negative interest rates.”

Central banks around the world, particularly in developed markets, have slashed interest rates in recent years to boost sluggish growth.

The U.S. Federal Reserve took rates to near zero during the financial crisis, and yields on bonds have remained historically low for years. The 10-year Treasury note currently yields around 2.0174 percent.

However, the Fed has been considering raising its key interest rate for the first time since 2006, a decision that has been complicated by global headwinds and subdued price pressures in the United States.

via SOURCE

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