Dow Jones is reporting that PIMCO’s Bill Gross sees the Fed pausing at 3.5% by August. He is looking US GDP Growth at 2%-3% in the next 6 months.

Even more interesting, Gross notes the Fed may cut rates by year-end.

Note that my expectations (see this column) are for cuts to begin sometime in 2006.

I see your expectations for two more hikes .. And as long as we are making
predictions, I will raise you a new series of rate cuts (yes, cuts),
beginning mid-2006.

Why? ‘Cause the Fed will be do what the Fed always does — careen
from one "situation" of their own creation to another — while the side effects
each prescription begets create a whole new round of fevers and chills, and yet
a new prescription is then rolled out to treat those ills. It is an endless
cycle.

Now, it seems Bill Gross one ups me. I suspect he’s wrong, that the Fed might be reluctant to reverse course so quickly.

I’ll see if I can track the rest of his comments down.

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UPDATE:  June 21 2005, 11:55 am

11:53 (Dow Jones) Speaking in Chicago, PIMCO’s Bill Gross says he expects the Fed to take the target funds rate to 3.5% by August, and then pause. Gross, who has been increasingly bullish on rates, took things a step further by predicting the Fed may actually start easing rates by the end of the year. Meanwhile, he sees U.S. GDP growth slowing to between 2%-3% in the next six months.

"I think they will have to stop (raising rates) shortly" to keep the U.S. economy going, Gross told reporters after speaking at Morningstar Inc.’s (MORN) investment conference, projecting the economy will grow 2% to 3% in the next six months. Gross is managing director of one of the world’s largest bond funds, with $450 billion in fixed-income assets under management.

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UPDATE:  June 22 2005, 10:45 am

More details can be found here:

Bill Gross: Fed to end rate hikes soon
Believes the Fed will end hikes this summer, then send rates lower; cautions against hedge funds.
June 21, 2005: 2:45 PM EDT
http://money.cnn.com/2005/06/21/news/economy/gross_rates.reut/index.htm

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Category: Economy, Fixed Income/Interest Rates

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

4 Responses to “Gross: Fed May Cut Rates By Year-End”

  1. Gross: Fed May Cut Rates By Year-End

    The Big Picture writes:

    Dow Jones is reporting that PIMCO’s Bill Gross sees the Fed pausing at 3.5% by August. He is looking US GDP Growth at 2%-3% in the next 6 months.

    Even more interesting, Gross notes the Fed may cut rates by year-end.

  2. G. Eddy says:

    For an alternate view, read John Berry’s column in Bloomberg News. He predicts several more rate increases.

    http://quote.bloomberg.com/apps/news?pid=10000039&refer=columnist_berry&sid=agP8o9C9IXaI

  3. Andy Nardone says:

    Just talking his book, it’s nice to have a bully pulpit. And as with Greenspan, Gross et al. have no better crystal ball than the rest of us.

  4. john brown says:

    Whatever the Fed is doing it seems to be fighting Treasury’s dollar policy fight. For its own sake, mind you. I don’t get the WSJ but saw Ron Insana interview the author of an article explaining the “conundrum” as being due to a surplus of “savings”, which is really a surplus of dollars. This notion is discussed elsewhere as well: see < http://www.andongkim.com/articles/2005/06/Duncan_worryinggreenspan.htm> If Gross is right, the Fed could be wanting to lower rates to weaken the dollar. And if all this commentary is right, we need to get up to snuff on what the implications are of a weak dollar policy, and what happens if everyone twigs to it at once.