William Gross, chief investment officer and founder of Pimco’s Total Return Fund, said he expects the Federal Reserve to cut interest rates to about 4% by year end.
He said the current rate of 5.25% hasn’t hurt the economy and has cooled inflation, but the weak housing market and slow retail sales suggest the Fed will lower rates.
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“I think the weak retail numbers have pointed the economy in the direction of down,” Gross told CNBC's "Street Signs." “The revised numbers for the first quarter will probably show that the economy grew less than 1%, although it looks like the second quarter is going to come in at a 2%-plus number. Average those out and we’re looking at 1.5% -- and that’s far below the potential growth of the U.S. economy, which is close to 3%.”
The Commerce Department said U.S. retail sales fell 0.2% in April. It was the largest decline in retail sales since last September. Excluding autos, retail sales were flat.
The Labor Department said wholesale prices rose 0.7% in April, down from a 1% increase in March. Gasoline prices jumped 8.2%, following increases of 8.7% and 5.3% in the previous two months.
Outside food and energy, prices were unchanged last month, the second straight month the core inflation index was flat.