Bill Gross slams Fed's interest rates forecast

The world’s biggest bond manager Bill Gross has offered a curt retort to the Federal Reserve’s decision to keep US interest rates at near zero until late 2014.

Gross, who manages the $242 billion Pimco Total Return Bond fund, used his firm’s official Twitter channel to liken to the interest rate move to a QE-type move which could lead to ‘financial repression’.

The Federal Open Market Committee (FOMC), the Fed's monetary policy committee, announced it would keep the target range for federal funds at 0% to 0.25% and added these rates are set to be held at ‘exceptionally low levels’ for at least two years.

However, the measure did not meet with a welcome from Gross. His full response read: ‘Fed likely on hold for at least next 3 years. Q.E 2.5 today, QE 3,4,5…lie ahead. Financial repression.’

The interest rate forecast symbolises a change in transparency for the US Federal Reserve and marks the first time FOMC members’ individual interest rate forecasts and economic projections have been disclosed.

A formal inflation objective was set by the committee at 2%. It said communicating this ambition clearly to the public would help to ‘keep longer-term expectations firmly anchored’.

According to FOMC notes, only one member of the panel voted against the monetary policy action on the projection of keeping interest rates low.

Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, preferred to omit the description of the time period over which economic conditions would like warrant exceptionally low interest rates.