The Internet news site Newsmax.com spoke to well-known bond investor Bill Gross about the direction of the federal funds rate. For those of you unfamiliar with the term, this rate is what news reports are referring to when they talk about the Federal Reserve changing interest rates. According to Newsmax.com:

Bond expert Bill Gross, founder of Pimco, says that the Federal Reserve will leave the benchmark federal funds rate at two percent through December, unchanged from today.

In an interview, Gross said that the Fed is walking a tightrope, inflation on one side and recession on the other.

For the economy, though, the Fed is probably doing the right thing for now, Gross said.

“The Fed, I think they are at neutral, and they should be,” said Gross.

Federal Reserve, Washington, DC

Gross addressed talk coming from the Fed about taking a tougher stance on inflation, and possibly raising the fed funds rate. The manager of the $130 billion Pimco Total Return Fund told Newsmax.com:

The Fed is jawboning, and they are jawboning appropriately. By this time in December, the Fed funds rate will still be at two percent.

The Internet news site noted that Gross sees inflation coming down during the next year, and thinks the Federal Reserve is managing the U.S. economy in that direction.

Source:

“Bill Gross: Fed in Neutral Until December”
Newsmax.com, July 15, 2008

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