Federal Reserve policies are progressively having less impact, and by this time next year we’ll see unemployment higher than today's 8.2 percent, Pimco co-founder Bill Gross told CNBC’s “Street Signs” on Wednesday.
While the Fed could cut interest rates on reserves or adopt quantitative easing — whereby the Fed buys financial assets to inject a more money into the economy — among other policies, Gross said “interest rates are close to rock bottom at the front end of the curve and there’s little the Fed can do there.” (Related: Biggest Holders of U.S. Government Debt).
While the Fed could cut interest rates on reserves or adopt quantitative easing — whereby the Fed buys financial assets to inject a more money into the economy — among other policies, Gross said “interest rates are close to rock bottom at the front end of the curve and there’s little the Fed can do there.” (Related: Biggest Holders of U.S. Government Debt).
As
interest rates move down to the zero line, there are negative
implications, Gross cautioned. Low rates can hurt money market funds,
banks, insurance companies and pension funds that are typically used to
higher rates, he said.
He
added, “There’s a negative twist to the twist, which I don’t think Fed
policymakers are factoring in.” Twist refers to the Fed’s Operation Twist, where the Fed buys longer-dated Treasurys to bring down long-term interest rates.
Read more: http://www.cnbc.com/id/48148693
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