By Ros Krasny
NEW YORK (Reuters) - The Federal Reserve will guard its monetary policy ammunition and not rush to lower interest rates in 2007, Bob Morris, chief investment officer at Lord Abbett & Co. LLC, said on Wednesday.
Morris joined a chorus of top money managers at the Reuters Investment Summit going against the market's collective wisdom that Fed rate cuts are on tap for the first half of 2007.
After pushing rates down to 1 percent in 2003, "the Fed has had this window, this wonderful opportunity to get rates back up ... I think they're going to grudgingly give away that fire power," Morris said.
"The best guess is the Fed will do nothing" in 2007, he said. "In 2008 the Fed could be in a position to bring fed funds down a little bit."
The long-running conundrum of low long-term bond yields continues, and "gurus" expecting the inverted yield curve to normalize with lower short-term yields might be wrong, Morris said.
The way the conundrum is resolved will be "the story" for financial markets in 2007, he said.
In contrast to prevailing worries about inflation, Morris warned that the current economic cycle could end with a new deflation problem.
"We've built a tremendous amount of capacity ... throughout the developing world," he noted. "I don't think inflation is the real problem." Continued...
© Thomson Reuters 2008. All rights reserved.
| Paper | Aug 20 - 21, 2008 | Manufacturing |
| Japan Investment | Jul 01 - 2, 2008 | Country Summits |
| Global Real Estate | Jun 23 - 25, 2008 | Real Estate |
| Consumer and Retail | Jun 16 - 18, 2008 | Consumer Retail |
| Investment Outlook | Jun 09 - 12, 2008 | Financial Services / Exchanges |
