PIMCO on Fed Game Changer


What does the head of the world's biggest bond firm have to say about the Fed’s extraordinary action Tuesday?

Mohamed El-Erian, the chief executive of bond giant Pacific Investment Management Co, or PIMCO, said when he heard the news of the day only one word came to mind, “Wow!”

In other words he took the move to mean the Federal Reserve was willing to throw everything at the current financial crisis.

As you likely know on Tuesday the Fed reduced the federal funds rate (the interest that banks charge each other) to a range of zero to 0.25 percent. Also they pledged to use "all available tools" to stimulate the economy including the purchase of large quantities of mortgage-related debt and possibly buying long-term Treasury securities.

"They're not only saying effectively we're going to zero and we're going to stay there for some time.. but they're saying they're going to buy whatever they need to buy and blow up their balance sheet."

It's history in the making. "History books are going to be written about what happened on Tuesday," El-Erian says.

However don't expect a walk in the park. El-Erian is concerned about some unintended consequences. “The simple one is that the currency comes under pressure. The more difficult one is the outcome of messing around with market relationships.”

To see our entire interview with Mohamed El-Erian please watch the video.

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