Paul Mcculley February 2008

Paul McCulley's Complete Fed Forecast Track Record | The Big Picture

(Bloomberg) — Pacific Investment Management Co.’s Paul McCulley said the Federal Reserve’s exit strategy from the unprecedented initiatives put in place during the economic crisis won’t include interest-rate increases until 2011 and will likely involve paying interest on reserves.  The Fed will raise its benchmark lending rate “no sooner than 2011,” and any speculation officials will raise interest rates this year is “simply silly,” McCulley wrote in a commentary on Pimco’s Web site. On June 30, 2004 The Fed raised rates from 1.00% to 1.25%.  This was the first of 17 consecutive rate hikes that would eventually end when the Fed hiked to 5.25% on June 29, 2006.  During this period the fed funds futures contract predicted what the Fed would do with nearly 85% accuracy as much as 50 days before the FOMC meeting.  What did McCulley think during this period? (Bloomberg) — The Federal Reserve may be nearing the end its interest-rate increases as a result of higher oil prices, Paul McCulley, a managing director at Pacific Investment Management Co., told financial news network CNBC.  “I think the Fed will reflect in their policy the fact that they’re near the neutral zone,” where the federal funds rate is equal to the rate of inflation, McCulley said. Newport Beach, California-based Pimco manages the world’s largest bond fund. (Bloomberg) — The Federal Reserve may pause after raising its benchmark interest to 3 percent, said Paul McCulley, a managing director at Pacific Investment Management Co. … “I do think they are about finished,” McCulley, who helps manage a quarter of the Newport Beach, California-based firm’s $400 billion of assets, said in an interview with Bloomberg Television. “Once they get to 3 percent, they are at the low end of the common known range of neutrality and I think they will want to stop punishing us every eight weeks.” (Bloomberg) — The Federal Reserve may raise its interest-rate target just two or three more times because of a “soft patch” that is emerging in the global economy, according to Paul McCulley, a managing director at Pacific Investment Management Co.  The forecast by McCulley, whose firm manages the world’s biggest bond fund, means the Fed’s target rate for overnight loans between banks would peak at 3.25 percent to 3.50 percent.

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