Investors lulled into ‘dreamland’ by central banks, warns Bill Gross

Investors are living in a “dreamland” brought on by global central banks’ decision to continue pumping up the world economy even as it has rebounded sharply from the pandemic, Bill Gross has said.

Historically low interest rates and mammoth bond-buying programmes, which are only now being cautiously scaled back, have nurtured a widespread bout of financial euphoria in everything from stocks to digital assets such as “non-fungible tokens”, the founder of bond investment group Pimco told the Financial Times in an interview.

“It’s dangerous,” Gross warned of accommodative central bank policy. “It’s all dreamland that’s been supported by interest rates that aren’t where they should be.” 

The US inflation rate, which was already running hotter than the Federal Reserve had been expecting, accelerated to a three-decade high of 6.2 per cent in October. Price growth is also running well ahead of target in other global economies, including the UK. That has exacerbated concerns that central banks will need to act sooner and more aggressively than previously indicated.

Gross’s comments on financial exuberance echo a call from Christian Sewing, Deutsche Bank chief executive, who said on Monday that central banks should tighten monetary policy to provide “countermeasures” against surging inflation.

Gross, who is now retired, said he was sceptical inflation would stay this high or accelerate further. He predicted, however, that it was likely to stay well above the Fed’s 2 per cent target for the foreseeable future.

The reporter on this story can be reached on robin.wigglesworth@ft.com and is on Twitter at @robinwigg