Bill Gross, the former manager of the worlds largest bond fund, has posited that the Fed is likely to begin slowly raising interest rates and put an end to the extended period of near 0% borrowing that financial markets have experienced.
Gross has said previously that the falling oil prices and strong dollar are keeping the Fed from moving too quickly too soon, and that rates are likely to increase at the end of the year. He speculates that after two quarters of 3% growth in 2015 as a result of increased discretionary spending, we will see exports fall and GDP slow to 2% in 3Q and possibly to 1% in 4Q.
Gross, in an interview on Bloomberg Television, said the Fed may move by “25 basis points in July or August” and then even further in late 2015. By February 2015, the Fed funds rate is expected to reach 2%. In a telephone interview, Gross commented on the anticipated increase saying, if it fails to generate real growth, then the game again will probably change.”