Pimco’s Ivascyn Says It’s ‘Dangerous’ to Think the Fed Is Done

Sixteen months after the Federal Reserve began its most aggressive rate-hike cycle in decades, markets are breathing a sigh of relief that the central bank — at long last — may finally be done.

At Pacific Investment Management Co., though, Daniel Ivascyn says investors would be wise to remember that’s no sure thing.

He’s not a contrarian bucking the broader consensus that the central bank is near the end of its tightening campaign. The Fed could raise rates again in September if the inflation data supports doing so, he said, though the odds are “close to a coin flip.”

But even if it does hold steady then, he said, the risk of rate hikes will likely linger for some time to come. One reason: The housing market has remained resilient despite the steep jump in mortgage rates, in part because so many homeowners locked in low rates. And those elevated property prices may keep rippling through to rents, putting upward pressure on inflation gauges.

“There is a chance inflation remains sticky and above central bank targets,” said Ivascyn, co-manager of the $124 billion Pimco Income Fund, which has beat roughly 90% of its peers in 2023 and over the past five years. “So if the Fed does pause and they don’t go again this year, it will be dangerous to think they are done.”

Real Estate Market Still Posing Inflation Risks