Inflation in the U.S. is likely to come back slowly, keeping the Federal Reserve from raising interest rates for an extended period, according to the chief executive officer ofPacific Investment Management Co.
Over the next couple of years, prices are likely to increase to the 2.3% to 2.4% level, Emmanuel “Manny” Roman said Tuesday at the Bloomberg Invest Global virtual event. The central bank has learned its lesson from past interest rate increases and will be determined to avoid another “temper tantrum,” he said.
“The days of inflation we remember are gone,” Roman said. “We don’t think the Fed is going to raise rates for a very long time.”
Led by the Fed, central banks have been cutting interest rates and buying securities to combat the effects of the coronavirus pandemic, an intervention that helped stabilize global markets. Even as U.S. unemployment soared to its highest level in decades, stock markets have recovered most of their post-pandemic losses andcorporate debt investors have poured money into junk bonds.
U.S. equities rose to a two-week high Tuesday amid a report that President Donald Trump supports sending another round of checks to Americans and data that showed manufacturing nearing expansion.
Pimco, with about $1.8 trillion in mostly fixed-income assets under management, israising at least $6 billion for distressed credit and other corporate debt opportunities to take advantage of dislocations driven by the coronavirus pandemic. It’s also looking to return as anoriginator of collateralized loan obligations for the first time since 2006, eyeing prospects for charging higher interest rates and stricter underwriting standards than pre-pandemic issues.
Rivals such as Howard Marks’sOaktree Capital Group also have launched new long-term funds to seize underpriced assets that feature multi-year lockups to allow the investments to regain value.
Under Roman, Pimco has continued to focus on actively managed funds even as money pours into low-fee index-tracking products. U.S. active managers saw assets in their fundsdip in May from a year earlier as the spread of the coronavirus sent equity markets swinging wildly.
Roman, 56, became CEO of Pimco, a unit of Allianz SE, in 2016 after heading Man Group Plc and spending 18 years at Goldman Sachs Group Inc.
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