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Unemployment Will Prevent Fed From Rate Hike: Gross

Persistently high unemployment likely will keep the Federal Reserve from raising interest rates for at least another year, Pimco's Bill Gross told CNBC.

Bill Gross
CNBC
Bill Gross

Speaking just after Fed Chairman Ben Bernanke addressed the National Press Club, the managing director of the world's largest bond fund manager focused on one key phrase in the address: "We will require a sustained period of stronger job creation before recovery can be considered established."

"I'll take that one step further and say the Fed will not raise interest rates unless the recovery is considered established," said Gross, who predicted a "Groundhog Day" scenario of progressive central bank meetings without any move on rates.

"He's looking at job creation, looking at the unemployment rate," he added. "Would an 8 percent unemployment rate cause the Fed to raise interest rates? Perhaps, but we're far from that at this point."

With that likely policy stance in place, Bernanke will be unable to maintain his targeted inflation rate of 1 percent, Gross said.

Surging commodity prices will cause the headline consumer price index to keep rising, even though the core CPI, which strips out food and volatility, remains tame.

"We'd have to see commodity prices coming down," Gross said. "I don't suspect that's going to be the case, simply because emerging market economies have been very strong and will continue to be strong going forward."