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A version of this article was previously published in Markets Insider
Theron Mohamed
Oct 7, 2022
- Bill Gross cautioned the Fed and other central banks from raising interest rates much higher.
- The “Bond King” warned further tightening could cause a credit crunch with global fallout.
- Gross rang the alarm on the amount of US debt, and economic headwinds in other countries.
Bill Gross has warned the Federal Reserve and its central-bank peers against hiking interest rates much higher, as they risk causing a painful credit crunch and tanking the global economy.
“The US and other economies cannot stand many more rate increases,” Gross said in his latest investment outlook, adding that a federal funds rate of 4.5% next year would be excessive.
The Fed has lifted its benchmark rate from virtually nothing to a range of 3% and 3.25% in recent months, and signaled rates could reach as high as 4.9% in 2023.
Gross, whose nickname is the “Bond King,” cofounded Pimco and managed its flagship Total Return fund. He argued the US economy is too indebted to handle materially tighter financial conditions, especially with a raft of growth headwinds buffeting other nations.
