Newport Beach-based Pacific Investment Management Co.’s Bill Gross says inflation could put the breaks on Federal Reserve interest rate cuts.
Gross’s comment came after a report Wednesday that the Consumer Price Index, a key inflation reading, rose 0.4% last month.
That matched the 0.4% jump recorded in December and exceeded the 0.3% rise expected by economists.
“There’s a roadblock and we’ll just have to see whether the tradeoff between inflation and the ultimate progress in terms of the credit markets is a viable one,” Gross said in an interview with Bloomberg.
The Federal Reserve also said that core inflation, or the price for goods excluding food and energy, would rise as much as 2.2% for the year, surpassing earlier forecasts for a 1.9% rise.
Gross also sees a weak dollar as reason to keep the rate steady.
The Federal Reserve has set its target rate for the overnight lending between banks at 3%, down from 5.25% a year ago.
Gross said that the recent cuts by the Federal Reserve has produced “very little” so far.
The central bank has been lowering rates to offset mortgage-related losses estimated at close to $150 billion.
“Those looking for quick overnight miracles are going to be disappointed,”
he said.
Gross is the chief investment officer of Pimco, which manages more than $700 billion in bond funds.
