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Gross on Yellen: she’s already running out of ammo

Gross on Yellen: she’s already running out of ammo

PIMCO’s Bill Gross has hailed Federal Reserve chair nominee Janet Yellen as a history maker but quickly questioned how effective she will be in the post.

The outspoken bond manager and frequent Tweeter was quick to air his thoughts in the wake of Yellen being nominated by President Obama to succeed incumbent chair Ben Bernanke in January 2014.

Yellen will make history when she moves from her vice-chair position to become the first woman to hold one of the most senior central banking roles in global economies.

Gross, who runs the $250 billion PIMCO Total Return Bond fund, gave a brief overview of what challenges Yellen will now face.

He said: ‘Now that she’s made history how will she shape history? [She is] more dovish than Bernanke but runnin’ outta ammo. It now depends on forward guidance.’

This comment could be read as a continuation of Gross’s criticism of ultra-accommodative Fed policy, which saw him focus several of his market commentaries on Bernanke’s methods.

Yellen had been the long-term frontrunner for the post following the withdrawal of her nearest rival Larry Summers in mid-September.

Many market commentators expect Yellen to continue the Fed Reserve along the path which had largely been set by Bernanke, despite his decision not to taper in September.

Yellen direction

Commenting on the potential course Yellen will now take, Russ Koesterich, global chief investment strategist at BlackRock, said he foresees tapering before the end of the year.

‘With the President’s nomination of Yellen, we continue to believe that the Federal Reserve could begin tapering its $85 billion-a-month bond purchasing program as soon as December and that its pace will likely be slow, and dependent on the strength of the US economy.’

‘Further, a Yellen-run Fed would likely place significant weight on the 2nd part of the Fed’s dual mandate, full employment, even at the cost of a temporary rise in inflation.  We maintain our belief that rate hikes are unlikely to come before 2015.’

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