Portfolio manager Bill Gross, who has repeatedly criticized the Federal Reserve for keeping interest rates too low, now recommends that the Fed refrain from raising rates too aggressively.
Just one day after the U.S. central bank increased the federal funds rate 25 basis points to a range of 1.5%-1.75%, Gross writes in his latest outlook for Janus Henderson that “U.S. and global economies are too highly leveraged to stand more than a 2% fed funds level in a 2% inflationary world.”
He continues: “If more than 2%, a stronger dollar would affect emerging market growth and lead to perhaps premature tightening on the part of the [European Central Bank] and other developed market central banks … 2% fed funds in a 2% inflationary world is the current limit in my opinion.”
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(Related: Chances Rise for 4th Fed Rate Hike in 2018)
That’s not what Fed officials suggested in their policy statement and “dot plot” projections for economic growth and inflation. They indicated two or three additional rate hikes this year, which would bump up the fed funds rate to a range of 2%-2.25% or 2.25%-2.50% by year-end.