The Federal Reserve will probably increase Treasury purchases to revive a U.S. economy that is almost stalled, Paul McCulley, a portfolio investor at Pacific Investment Management Co., wrote on the company’s website.
Pimco, which runs the world’s biggest mutual fund, estimates U.S. gross domestic product growth will be in a range of 1.5 percent to 2 percent, versus 1.7 percent that the Commerce Department reported for the second quarter. Inflation will slow to a band of 0.75 percent to 1.25 percent, McCulley said in his report. The figure was 1.4 percent in August from the year before, Commerce Department figures show.
Fed Chairman Ben S. Bernanke said yesterday that the central bank’s first round of large-scale asset purchases improved the economy and that further buying will probably help more. Policy makers are debating whether to increase the amount they buy, a strategy known as quantitative easing, as soon as their next meeting on Nov. 3.
“A new round of quantitative easing is likely,” McCulley, who is based in Newport Beach, California, said in his report. “The bottom line for the U.S. is a growth trajectory so slow you’d nearly call it stalled.”
The economies of Europe, Japan and the U.K. will have trouble picking up, according to Pimco’s report.
Bernanke said the first wave of asset buying that ended in March was effective in spurring the economy. The central bank said in August it would use principal payments from its holdings of agency mortgage-backed securities and agency debt to buy Treasuries. It announced on Sept. 21 it is prepared to do more to help the economy and to keep costs from falling.
Japan Growth
“The additional purchases -- although we don’t have precise numbers for how big the effects are -- I do think they have the ability to ease financial conditions,” Bernanke said yesterday in response to questions in Providence, Rhode Island, at a forum with college students.
The record $252 billion Pimco Total Return Fund managed by Bill Gross returned about 10 percent this year, beating 80 percent of its peers, according to data compiled by Bloomberg.
Pimco, which managed more than $1.1 trillion of assets as of June 30, according to its website, is a unit of Munich-based insurer Allianz SE.
The Bank of Japan, which concludes a two-day meeting today, may also decide to boost purchases of government debt, according to a report by Nikkei English News today, which didn’t cite a source.
“It is difficult to generate growth given Japan’s deflationary and demographic realities,” McCulley wrote. “Japan has limited political willingness to boldly pursue reflationary policies, and they have major doubts as to the effectiveness of such measures, even if tried.”
To contact the reporters on this story: Garfield Reynolds in Sydney at Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
http://jodnet.blogspot.com
Pimco, which runs the world’s biggest mutual fund, estimates U.S. gross domestic product growth will be in a range of 1.5 percent to 2 percent, versus 1.7 percent that the Commerce Department reported for the second quarter. Inflation will slow to a band of 0.75 percent to 1.25 percent, McCulley said in his report. The figure was 1.4 percent in August from the year before, Commerce Department figures show.
Fed Chairman Ben S. Bernanke said yesterday that the central bank’s first round of large-scale asset purchases improved the economy and that further buying will probably help more. Policy makers are debating whether to increase the amount they buy, a strategy known as quantitative easing, as soon as their next meeting on Nov. 3.
“A new round of quantitative easing is likely,” McCulley, who is based in Newport Beach, California, said in his report. “The bottom line for the U.S. is a growth trajectory so slow you’d nearly call it stalled.”
The economies of Europe, Japan and the U.K. will have trouble picking up, according to Pimco’s report.
Bernanke said the first wave of asset buying that ended in March was effective in spurring the economy. The central bank said in August it would use principal payments from its holdings of agency mortgage-backed securities and agency debt to buy Treasuries. It announced on Sept. 21 it is prepared to do more to help the economy and to keep costs from falling.
Japan Growth
“The additional purchases -- although we don’t have precise numbers for how big the effects are -- I do think they have the ability to ease financial conditions,” Bernanke said yesterday in response to questions in Providence, Rhode Island, at a forum with college students.
The record $252 billion Pimco Total Return Fund managed by Bill Gross returned about 10 percent this year, beating 80 percent of its peers, according to data compiled by Bloomberg.
Pimco, which managed more than $1.1 trillion of assets as of June 30, according to its website, is a unit of Munich-based insurer Allianz SE.
The Bank of Japan, which concludes a two-day meeting today, may also decide to boost purchases of government debt, according to a report by Nikkei English News today, which didn’t cite a source.
“It is difficult to generate growth given Japan’s deflationary and demographic realities,” McCulley wrote. “Japan has limited political willingness to boldly pursue reflationary policies, and they have major doubts as to the effectiveness of such measures, even if tried.”
To contact the reporters on this story: Garfield Reynolds in Sydney at Wes Goodman in Singapore at wgoodman@bloomberg.net. To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.
http://jodnet.blogspot.com
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