Tags: Gross | bank | England | rate

Gross: Bank of England to Lead Fed on Rate Hike

Thursday, 13 Feb 2014 08:18 PM

By Dan Weil

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The Bank of England will boost short-term interest rates before the Federal Reserve and central banks of other developed nations, says Bill Gross, chief investment officer of Pimco.

"Carney/BOE say likely to validate forward curves — i.e. higher short rates soon. UK assumes leader of the tightening pack," Gross wrote on Twitter Wednesday. He was referring to Bank of England Gov. Mark Carney.

Gross tweeted after the Bank of England raised its economic growth forecast to 3.4 percent for this year, well above its November estimate of 2.8 percent.

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That upward revision raised speculation that the BOE may lift rates sooner than expected if
economic growth accelerates, The Wall Street Journal reports. Some financial market traders said a rate hike may come in early 2015.

Carney has sought to reassure markets that rates won't be increased soon. On Wednesday he
severed the link between the unemployment rate and consideration of a rate hike.

Apparently he convinced the Confederation of British Industry, Britain's principal business lobbying group.

"The bank’s new guidance will give businesses further peace of mind that interest rates will stay low for some time, until investment and incomes are growing at sustainable rates," Katja Hall, the group’s chief policy director, told The New York Times.

"The bank has made clear that even when the economy is operating at more normal levels, rates will only increase gradually."

As for the Fed, it too has worked to make clear that no rate hike is coming anytime soon. Gross doesn’t see an increase before early 2016.

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