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October 18, 2005

Bill Gross suggests Greenspan to soften, Mon., Oct. 17, 2005, 11:57 AM

In a CNBC interview with Bill Gross a few minutes ago, the manager of the world's largest bond fund suggests that the Fed under Alan Greenspan might change its policy of increasing the bank rate by +25 basis points. A meeting of the FOMC is held about every six weeks. Gross says they may not raise the rate at its next meeting.

A hawkish Fed has driven up the price of the trade-weighted USD to very high levels, and has placed a burden on the manufacturing and tourism segments of the U.S. economy. Any change in policy here would be good for gold, and would drop the value of the USD, which would increase inflation.

The prospects of inviting more inflation in order to kick-start the economy, or at least keep it out of recession, may not be as disconcerting to Bill Gross as the obvious relief to the crushing burden placed by higher rates on his immense bond portfolio. That portfolio as you probably know is the world's largest.

So the man has an axe to grind.

I wonder what Wall Street will have to say with respect to these remarks made by Bill Gross, the man known as the Bond King.

In five minutes, I'll give the Bank of Canada's response.

Posted by Posted by Bill Cara on October 18, 2005 11:58:54 AM | Category: Bonds