PIMCO Warns Fed About Raising Rates Too Fast

Bond fund giant Pacific Investment Management Co said on Tuesday the pace of Federal Reserve interest-rate increases is likely to be even more gradual than the firm expected in March and that the U.S. central bank may find it impossible to escape the effective lower bound of policy rates.

Pimco said in its quarterly Cyclical Forum outlook report that it cut its forecast for U.S. economic growth in the next 12 months to between 2.25 percent and 2.75 percent, from 2.5 percent and 3 percent in March.

“In contrast to robust consumption and housing, business investment confronts the headwinds from low oil prices and cutbacks in drilling and exploration, while exports will be challenged by the delayed effects of a stronger dollar and slower growth in emerging economies,” Richard Clarida, global strategic advisor, and Andrew Balls, chief investment officer of global fixed-income, wrote in the Pimco outlook report.

Pimco said it expected global economic growth in the next 12 months to remain broadly unchanged from where the Newport Beach, Calif-firm saw them in March, between 2.5 percent and 3 percent with global inflation between 2 percent to 2.5 percent.

Via Reuters

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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