Bill Gross, manager of the world’s largest bond fund at PIMCO, once again predicted that the Federal Reserve will launch a third round of quantitative easing (QE3) at its FOMC meeting next month.
In an interview with Bloomberg this week, Gross forecasted that a QE3 announcement will arrive “relatively soon” even if Fed Chairman Ben Bernanke does not signal its likelihood during tomorrow’s speech in Jackson Hole, Wyoming.
“They have a dual mandate,” Gross reminded viewers, “Unemployment is still above 8% and it’s obvious that the Fed isn’t comfortable, nor is the nation or the economy with 8% unemployment going forward.”
Just because Gross sees QE3 coming does not mean he expects it to have a significant impact on the markets or economy. Another asset purchase program by the Fed “will produce limited results,” he contended.
“It’s obvious that with each step the effects have been more and more limited, and from this point forward Ben Bernanke knows that the economic effects on equity and bond markets are going to be limited,” Gross added. “I don’t see the yield changing until the Fed suggests they might raise interest rates and until the Fed stops buying 10-year Treasuries.”
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