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NEW YORK (Reuters) - The U.S. Federal Reserve is unlikely to raise interest rates for a third time until later this year, as parts of the economy remain sluggish, Guggenheim Partners Global Chief Investment Officer Scott Minerd said on Monday.
If the U.S. bond market perceives that inflation is going to stay around 1.5 percent or lower, the Fed "could be ahead of the curve on inflation and a lot closer to the end of tightening," Minerd said in an interview.
"The growing list of categories experiencing downward price pressure, including commodities, energy, apparel, retailing, owner-occupied rent, etc., makes price acceleration to the Fed's 2 percent target unlikely anytime soon," he said.
"If this is the case, the market is discounting the fact that the Fed will have to stop the hiking cycle sooner in order to avoid further downward price pressure."
The Fed raised interest rates in June, the second time this year after a hike in December, as U.S. unemployment has continued to fall and consumer confidence has risen.
The Fed expects the economy to "expand at a moderate pace," or for inflation to pick up to about 2 percent by next year after a slew of disappointing data, the Federal Open Market Committee said in its June 14 statement.
Minerd said risk assets are as vulnerable as ever.
"Fixed-income markets continue to be mired in a prolonged period of low rates, which can lead to distortions in asset prices," he said. "Stocks and bonds have rarely been as expensive, and market complacency is a growing concern. Investors should keep their powder dry and take advantages of opportunities later this year."
Guggenheim continues to attract new money, the company said on Monday.
Guggenheim's intermediate-term flagship Total Return Bond Fund took in $364 million in June. The $7.1 billion fund, which according to Morningstar has outperformed 98 percent of its rivals over one, three, and five years, has experienced net inflows for 42 consecutive months.
Guggenheim Limited Duration Fund, a $1.9 billion short-term bond fund, took in $264 million in positive net flows. The fund has experienced 43 consecutive months of net inflows since its December 2013 inception and has outperformed 99 percent of funds in its Morningstar category over three years.
Guggenheim High Yield Fund, which has outperformed 97 percent of rivals over five years, took in $165 million. Guggenheim Macro Opportunities Fund, a $5.7 billion non-traditional bond fund, took in $145 million in June.
Guggenheim, which has $161 billion in fixed-income assets, said its BulletShares suite of defined maturity exchange-traded fund has a record $8.6 billion in assets.
Reporting by Jennifer Ablan; Editing by Richard Chang