[Economics] Gross warns: a rate increase beyond 3% could "break the economy" of the US

[#Wittels-]

He thinks the world has gotten used to 'zero rates'

The famous 'king of bonds', Bill Gross, announced this Monday that the Federal Reserve could "break the economy" of the US if it increases interest rates above the environment of 2.5% to ??3% . Gross believes that although inflation is reaching worrying levels, the Fed could not impose increases much beyond those levels without triggering a recession.

"We have become accustomed to lower and lower rates and a rise, however small, will break the property market," the Pimco founder told the Financial Times.

On March 16, the Fed raised its base interest rate by a quarter point, to around 0.25% to 0.5%, signaling more hikes to come at each of the remaining six meetings. this year. This move is aimed at dealing with the highest level of inflation in four decades, despite the fact that it increased the risks for economic growth.

Gross's views are very similar in tune to responses to Bloomberg's weekly Markets Live survey, which asks savvy US investors about their future expectations. More than half believe a recession is likely to break out in the US next year, while only 16% believe it will take at least 2025 to see a downturn.

 

Gross has been criticizing zero interest rates for years, saying they have discouraged saving and helped inflate a stock market bubble that has led to manias like 'meme stocks' and NFTs. "All this nonsense," he believes, is because Americans "can't find decent returns on their retirement funds" in traditional products.

The Fed's sharp turn to combat inflation grew even more reassuring on Friday, as central bank 'hawks' urged rates to be raised at an even faster pace, with even one of the 'doves' acknowledging there were an argument in favor of an aggressive tightening of the entity's monetary policy.

In the first wave of comments from Fed officials following the first rate hike, St. Louis Fed President James Bullard said he favored raising rates above 3% by the end of the year. , while Neel Kashkari, president of the Minneapolis Fed, acknowledged his mistake in having been cautious in raising, and announced that he now supported the more aggressive policy.

 

Link: https://www.eleconomista.es/mercados-cotizaciones/noticias/11702293/04/22/Gross-advierte-un-aumento-de-los-tipos-mas-alla-del-3-podria-romper-la-economia-de-EEUU.html