UPDATE 1-PIMCO's Gross: US recession probably started in Dec 07

(Adds Gross comments to Reuters and more quotes from CNBC appearance)

NEW YORK, Jan 22 (Reuters) - The manager of the world's biggest bond fund said on Tuesday that the U.S. economy probably fell into recession in December, with the housing market broadly depressing economic activity.

"Housing was the big spark and now it is the consumer...weekly retail numbers are dismal," Bill Gross, chief investment officer of Pacific Investment Management Co. or PIMCO, told Reuters.

"It's simply now a consumer-led mild recession that will show up in the first and second quarter GDP numbers in the negative -- with a minus sign. That is what the Fed has to turn around."

Separately, speaking on CNBC television, Gross said he expects the federal funds target rate to be 2.5 percent in six months' time. His remarks came after the Federal Reserve slashed the funds rate by 75 basis points to 3.5 percent earlier on Tuesday in an intermeeting move.

Gross added that the Fed needs to bring 30-year U.S. mortgage rates down to between 4 percent and 4.5 percent but said that will be tricky to achieve with a funds rate at 2.5 percent.

"That's going to be a very difficult task with 2.5 percent fed funds," he said.

On the difficulties of bond insurers such as MBIA and Ambac, Gross said that financial markets remain focused on these companies and added that "the panic isn't out (of the markets) yet."

On the government's plans for a stimulus package, Gross said it was important, but added that the estimated amount of around $150 billion is "a drop in the bucket."

(Reporting by Jennifer Ablan and John Parry; Editing by Chizu Nomiyama)