Bill Gross On Rate Hike: 50 Basis Points Would Scare, 25 Is The Majority Consensus

With employment rate hovering around seven-year lows at 5.3 and the economy adding 215,000 jobs in July according to jobs data released on Friday, is a rate hike by the Federal Reserve in September now imminent?

"Bond King" and portfolio manager at Janus Capital Group Inc (NYSE: JNS), Bill Gross, was on Bloomberg TV recently to answer that question.

Want To Get Off Zero

"There are reasons why the Fed shouldn't move, but I think the Fed will move because of financial conditions," Gross began. "And I'll just briefly describe that. It's a situation in which I think central banks are beginning to recognize that there are negatives to low interest rates, as opposed to positives."

Related Link: Bill Gross: Lower Rates "Not The Cure – Part Of The Problem"

He continued, "The BIS put out a report last month that basically said there are medium term negatives, and they include some big corporations. And they include destruction of business models and a function in insurance land. And so I think they would simply want to get off zero and show the world that a move towards normalization is possible."

Majority: 25 Basis Points

Gross was asked whether he thinks the Fed will really raise rates in September, especially with the dovish statements made by the Bank of England yesterday. He replied, "Agreed, Bank of England was dovish. They're talking next year as opposed to this year. And the markets basically assume they are number two, but if number two is sufficiently behind September, well, the market makers and investors wonder whether September is the date.

"I still think it is. I think they're almost mentally committed to moving before year end, and whether it's 25 or 50 basis points, probably 25, I hope. Fifty (50) would scare the market. Twenty-five (25) then, I think September is almost a – well it's not a unanimous opinion, but it's a majority opinion at the moment," Gross said.