Gross Says QE3 Getting Closer as Goldman Sees Easing
By Wes Goodman - May 8, 2012
Bill Gross at Pacific Investment Management Co. and Jan Hatzius at Goldman Sachs Group Inc. (GS) say investors should prepare for additional bond purchases from the Federal Reserve to combat a slowing U.S. economy.
A decision to buy more debt is “getting closer,” Gross, who runs the world’s largest mutual fund, wrote on Twitter yesterday. Hatzius, the chief economist at New York-based Goldman Sachs, predicted in a report the same day that the Fed will announce additional monetary easing when it meets in June.
Prospects for more Fed purchases increased after a Labor Department report May 4 showed U.S. employers added 115,000 jobs in April, the smallest gain in six months. Europe’s debt crisis is also threatening to slow global growth. Ten-year Treasury yields fell to 1.81 percent yesterday, approaching the record low of 1.67 percent set Sept. 23.
“Risk markets need more ammo if they are to stay up,” Gross, who is based in Newport Beach, California, wrote on Twitter.
The Fed bought $2.3 trillion of bonds in two rounds of so- called quantitative easing, known as QE1 and QE2, to support the economy. Policy makers have also pledged to keep the target for overnight bank lending at almost zero until at least late 2014.
In a report titled “Still Dreary,” Hatzius said the U.S. economy is “sluggish but basically stable,” and the Fed may act in June to sustain the recovery.
“Taking out a bit more insurance still looks like the sensible choice for U.S. monetary policy makers,” he wrote.
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wgoodman@bloomberg.net.
To contact the editor responsible for this story: Rocky Swift at
rswift5@bloomberg.net