Pimco Warns of Deflation Risk as Central Banks to Cool Stimulus |

Pimco Warns of Deflation Risk as Central Banks to Cool Stimulus

April 13 (Bloomberg) — Developed economies face the risk of deflation as central banks end programs to revive their financial systems, according to Pacific Investment Management Co., the biggest holder of inflation-linked Treasuries.

A slowdown in economic growth is adding to deflation pressures, said Mihir Worah, who oversees the $18 billion Pimco Real Return Fund. Pimco, which runs the world’s biggest bond fund, is “underweight” inflation-linked bonds in portfolios that focus on the debt, he wrote in a report.

“There is a near-term risk of flipping to deflation given our view that developed economies have not fully healed and consumers are not yet ready to stand on their own two feet,” Worah wrote on the Newport Beach, California-based company’s Web site.

http://www.businessweek.com/news/2010-04-13/pimco-warns-of-deflation-risk-as-central-banks-to-cool-stimulus.html

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