PIMCO'S Gross says Fed to unveil QE3 at Jackson Hole

NEW YORK Wed Jun 22, 2011 12:15pm EDT

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NEW YORK (Reuters) - Bill Gross on Wednesday said the Federal Reserve will likely hint at a third round of bond purchases, better known as "quantitative easing," at its next Jackson Hole meeting in August.

Jackson Hole is an annual global central banking conference, led by the Fed, which takes place at Jackson Hole, Wyoming. It was at this event last year that Fed chairman Ben Bernanke said the U.S. policymakers were prepared to make a major new investment in government debt or mortgage securities if the economy worsened significantly or if the Fed detected deflation -- a prolonged drop in prices of wages, goods and assets like homes and stocks.

Gross, the co-chief investment officer of PIMCO, the world's top bond manager, on Wednesday said on Twitter: "Next Jackson Hole in August will likely hint at QE3 / interest rate caps."

PIMCO oversees more than $1.2 trillion in assets, mostly in fixed-income. PIMCO confirmed Gross had sent the Tweet on QE3.

Last week, Gross first introduced the idea that the Fed on Wednesday could signal that interest rates could be capped if warranted due to soft economic growth.

Gross said on Twitter last week on Tuesday that: "QE3 likely to take form of 'extended period' language or interest rate caps on 2-3-year Treasuries."

Gross also said on Twitter last week: "Next week's Fed statement will likely stress 'extended period of time' language or even a period of interest rate caps."

The Fed will issue its policy statement after the close of its meeting on Wednesday.

The recent soft patch of economic data has increased speculation over whether U.S. policymakers will perform a third round of bond purchases, an unconventional monetary measure known as "quantitative easing," or QE2. The second round of QE2's $600 billion in purchases will conclude on June 30.

(Reporting by Jennifer Ablan; Editing by Leslie Adler and Andrew Hay)

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