Bill Gross expects US Fed to hike interest rates by September

'Bond king' Bill Gross believes a dismal US jobs report will not deter the Federal Reserve from hiking interest rates by September.

Gross said the world's most powerful central bank will raise its benchmark rate by 0.5 percentage point a year, taking it to 2% by 2018.

That would be about half the central bank's own forecast of 3.75%.

Gross, runs the $1.5bn Janus Global Unconstrained Bond Fund.

The billionaire, speaking to Bloomberg Television on 3 April, said he still sees the Fed raising rates as soon as August.

Gross said: "They want to get off the dime. They want to get off zero, if only to prove that they don't have to stay at zero for a long, long time."

SocGen's take

Societe General said in a 3 April note to clients: "Despite today's disappointment, the report does not change our views on the labor market. By the June FOMC meeting, the unemployment rate likely to be around 5.2%-5.3%, only marginally higher than the Fed's new estimate of NAIRU.

We believe that the biggest hurdle for a June lift-off lies on the demand side. Based on our forecast for a spring rebound, we continue to view the June meeting as a strong contender for a lift-off."

Those views, however, contrast with a market that has pegged the odds of a rate hike in September at 35%, down from a 39% likelihood on 2 April, based on trading in Fed funds futures.

Odds of a June rate hike are 10%, the trading implied.