Pimco’s Mike Amey welcomes ‘stable’ Budget 2012
More on Fixed Income
- McNeil grows ‘selective’ over new issuance
- BlackRock moves into sub-investment grade bonds
- Cowley rejects offers to run fixed income funds
In focus: Budget 2012
The manager of the £949.6m Allianz Pimco Gilt Yield fund said chancellor George Osborne’s mid-term forecasts for cutting the UK’s deficits and increasing economic growth were “reasonable”.
He said they would reassure bond markets that the UK was keeping on track with its austerity measures
Mr Amey said: “The projections look reasonable as they are predicated on a low growth rate over the next few years.
“I’m a bit more sceptical on the 3 per cent growth rate for 2014 and 2015. At the back end of the forecast period we may see a bigger deficit than predicted but it won’t be enough to radically change the outlook.
“In three or four years’ time, assuming Europe doesn’t disintegrate, the deficit will be mostly eradicated and that is good news for markets.”
In the Budget statement yesterday afternoon Mr Osborne said UK GDP growth would reach 2 per cent this year, rising to 2.7 per cent in 2013 and 3 per cent in both 2014 and 2015. Meanwhile the UK’s borrowing would reach £126bn this year and fall to £21bn in 2016-17.
Mr Amey warned that the government was unlikely to drop to its 2 per cent inflation target, which chancellor George Osborne reaffirmed in the Budget, but he urged the Bank of England not to raise interest rates.
He said: “UK inflation will struggle to get below 2 per cent - the ability of the economy to maintain a sub-2 per cent inflation rate is weaker than it used to be. Asia will raise the prices of its exports, and domestic inflation is likely to be very sticky.
“The Bank is right to look through this because the alternative would be to raise rates which would put big pressure on the economy. Inflation of 2-3 per cent is not disastrous and should be tolerated.”