Pimco CEO Doesn't See Enough Growth To Support Fed Rate Projections

Pimco's CEO Douglas Hodge on Tuesday raised concerns about the current pace of growth in the world economy, saying it isn't strong enough to support the Federal Reserve's interest-rate projections. "If you look at the Fed Blue dots, the expectation is that real interest rates will rise to 1.5-2%, and nominal interest rates go up to 3.5-4%," he said at a speech at the PRI in Person conference in London. "At Pimco, we simply do not adhere to this view. We do not see the catalysts for growth across the global economy that will support this rate structure." A key reason, the world economy will struggle to grow is because developed markets are faced with the "three Ds" - debt, deficit and demographics, Hodge said. "With aging populations, there seem to be a tipping point where creating organic growth becomes increasingly difficult," he said. His comments on interest rates come as investors are counting down to the closely watched Federal Open Market Committee on Sept. 16-17. Economists are split as to whether the central bank will move to hike rates for the first time in nine years or hold off until later this year or next. Some market observers say the recent bout of China-fueled market turmoil will keep the Fed from increasing rates, while others argue the U.S. economy is strong enough to cope with its first rate increase in nearly a decade.

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