Gross says Fed move may be ‘too little too late’ amid turmoil

(Bloomberg) — Bill Gross said the Federal Reserve has waited so long to raise interest rates that any move now may be labeled “too little too late” as market turmoil restricts the room for policy makers to act.

“The ‘too late’ refers to the fact that they may have missed their window of opportunity in early 2015, and the ‘too little’ speaks to my concept of a new neutral policy rate which should be closer to 2 percent nominal, but now cannot be approached without spooking markets,” Gross wrote in an investment outlook Wednesday for Denver-based Janus Capital Group Inc.

Policymakers will gather in Washington Sept. 16-17 to consider raising rates for the first time since 2006. Federal Reserve Bank of Boston President Eric Rosengren said yesterday that uncertainty over inflation and global growth justifies a modest pace of interest-rate increases, regardless of when the central bank begins tightening.

Futures traders are betting the Fed will push back a rate increase. Odds of an increase in September have fallen to 34 percent from 40 percent at the end of July, according to data compiled by Bloomberg. October’s probability is about 46 percent and December’s is 60 percent.

The Fed “seems intent on raising” the federal funds rate “if only to prove that they can begin the journey to ‘normalization,’” Gross wrote. “They should, but their September meeting language must be so careful, that ‘one and done’ represents an increasing possibility –- at least for the next six months.”