PIMCO's Gross: Further Fed cuts needed for growth
NEW YORK (Reuters) - The Federal Reserve will have to cut its federal funds target rate to between 3 and 3.5 percent over about the next year to boost U.S. economic growth, Bill Gross, manager of the world's biggest bond fund, said on Wednesday.
Gross, chief investment officer of Pacific Investment Management Co., or PIMCO, spoke on CNBC Television shortly after the Federal Open Market Committee announced it cut its target overnight rate for lending among banks by 25 basis points to 4.50 percent.
"Ultimately, over the next six to 12 months, what the Fed has to do, and what the Fed has done in prior cycles, is to move down to a 1 percent real (as opposed to nominal) interest rate in order to restimulate the economy," Gross said.
"Three to 3.5 percent fed funds target is where they must go," said Gross.
He expects the U.S. economy to grow between about 1 and 2 percent over the next 12 months, inflation to run at between 2 and 2.5 percent and the jobless rate to rise above 5 percent.
In his November Investment Outlook letter released on Monday, Gross had said that fed funds would have to go down to 3.5 percent because of "an increasingly recessionary-looking U.S. economy."
Asked what his best investment was right now, Gross said: "Any non-dollar asset."
