Andrew Bosomworth, head of portfolio management at PIMCO Germany, said in an interview that he doesn’t expect the Federal Reserve to raise interest rates beyond 2018 due to economic uncertainty in the United States.
Mr. Bosomworth told Handelsblatt that he expects the Fed to increase interest rates in three steps by a quarter point each time over the next year. But doubts about the impact of U.S. President Donald Trump’s economic policy will keep the Fed from raising rates much beyond 2018, he said.
Sustained economic growth requires rising productivity, Mr. Bosomworth said, and this cannot be achieved by tax write-offs alone. Mr. Trump’s protectionist policies, even if they end up being more moderate than his rhetoric, will also prove a barrier, he said.
The U.S. president’s plans to cut taxes and invest in infrastructure could sustain growth for another year or two, Mr. Bosomworth said, but after that a recession could set in.
Though there’s disagreement at Pimco about the long-term impact of the Trump administration’s policies, Mr. Bosomworth said the asset manager’s strategists agree that there could be short-term turbulence.
As a consequence, fund managers at Pimco are keeping more liquidity on hand to take advantage of cheap purchase opportunities, he said.
Anke Rezmer covers the investment fund industry for Handelsblatt out of Franfurt. To contact the author: firstname.lastname@example.org