- Bill Gross said he thought a mild recession was on the way even before the Russia-Ukraine war started.
- The Federal Reserve and other central banks are “stuck in a low interest rate world,” he said in a CNBC interview.
- Now it’s too late for the Fed to prevent a recession, and he also noted there’s potential for stagflation.
The
Federal Reserve
waited too long before raising interest rates, and now there isn’t much they can do to prevent a mild
recession
, according to Pimco co-founder Bill Gross.
A recession was on the way even before the Russia-Ukraine war started and the subsequent spike in oil prices, he told CNBC Thursday. While the Fed is due to start hiking rates this month, it should have raised them much earlier and now it might not have the ability to navigate the current landscape without inducing a recession, he warned.
“I think they’re sort of handcuffed in terms of what they can do, they went so low,” Gross said of Fed policymakers. “And inflation now is so high on a historical basis that it’s going to be difficult raising interest rates too much.”
He noted that the Federal Reserve and other central banks are “stuck in a low-interest-rate world,” which increases the likelihood of stagflation, as well as inflation of “about 3-4%” for an extended period of time.
After cofounding Pimco in 1971, Gross left the investment management firm in 2014 and joined Janus Henderson Investors. He retired from active fund management in 2019 and now focuses on charity and his personal assets.
As for his own portfolio, the 77-year-old said he owns “a lot of oil pipeline partnerships,” among other investments in large companies.
But he said he wouldn’t recommend buying into stocks right now. Instead, he recommended investors remain cautious and taper their expectations of the same generous returns of the last two years when the Fed kept rates near zero.
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