A policy statement from the U.S. Federal Reserve indicates a “patient” approach to raising interest rates; Janus manager Bill Gross thinks the rise will be 25 basis points by June 2015. The FOMC said in a statement, “Based on its current assessment, the committee judges that it can be patient in beginning to normalize the stance of monetary policy.”
The economy has been improving, with unemployment rates low and the falling price of gas. However, wages have been stagnant, and the Fed is not going to move too quickly to raise rates, but “expand at a moderate pace.”
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“Bond King” Bill Gross thinks the 25 basis point rate rise he predicts for June will be mainly symbolic. Gross said on an interview with CNBC, “Even in the face of this low inflation, they recognized that zero percent interest rates or near-zero percent money market rates are distorting capitalism.” The result is that much of the money is moving into the “financial sector for arbitrage profits and very little of it is going into the real economy for investments.”
In addition, interest rates will rise to benefit “savers and investors.” However, Gross thinks the pace will be “very, very slow” to avoid disturbing the markets too much.
