Bond fund giant Pimco has two words of advice for the Federal Reserve: Hike already!
Scott Mather, chief investment officer of Pimco’s U.S. core strategies, told CNBC’s “Power Lunch” on Thursday, the Fed should raise rates, because the U.S. no longer needs emergency monetary intensive care.
“While it is probably close to a coin toss on whether they move today, they should act,” said Mather. “If they pass today, they will surely indicate a willingness to act as early as the October meeting. But the negatives of holding at zero increasingly outweigh the positives.”
“There will always be something going on external to the U.S. that causes uncertainty in some region of the world. But the majority of the developed world is on much firmer footing than at any time since the global financial crisis,” he added.
Mather believes the trajectory for the U.S. economy, including inflation, is unlikely to be materially altered by a small increase in the overnight rate.
“The markets will need to adjust,” he said. “But markets are increasingly less important to [the] real economy as linkages to confidence both consumer and business are fading and balance sheets have been refinanced and termed out.”
Whether or not the Fed hikes Thursday, Mather thinks the central bank should reinforce its message that the “fixation or over-reliance” on monetary policy to achieve economic outcomes is “unhealthy”.
“The Fed should be more like the ECB and other central banks that go out their way to emphasize that rate policy is not an economic policy,” said Mather.”It is time to shift focus to the limits of monetary policy and importance of structural issues.”
Pimco is a global investment management firm headquartered in Newport Beach, California, with over 2,000 employees in 13 offices. Total assets under management are $1.6 trillion, as of March.