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Buffett says tough for Fed to lift rates given strong dollar

Thursday, February 5, 2015 - 07:47
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Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said it would be "very tough" for the Federal Reserve to lift interest rates this year because of the stronger US dollar.

[SEATTLE] Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., said it would be "very tough" for the Federal Reserve to lift interest rates this year because of the stronger US dollar.

"That would exacerbate the problem," Mr Buffett said in an interview on the Fox Business network.

"I don't think it'll be very feasible to do." US economic growth, outperforming most industrialized counterparts, has helped push the nation's currency close to the highest level in more than a decade, making it cheaper for Americans to buy imported goods and helping to lower inflation that's already below the Fed's goals.

The US Dollar Index, which the Intercontinental Exchange Inc. uses to track the greenback against currencies of six trade partners, climbed 5 per cent last quarter.

The dollar's strength is pushing long-term Treasury yields to record lows as overseas investors look to profit from the rising currency. With Fed policy makers weighing when to raise rates they've kept near zero since December 2008, Mr Buffett said risks still lurk for investors who accept those yields.

"The last asset I would want to buy is a 30-year government bond, but that's a by-product of other policies which make sense," he said.

"I don't want a 10-day bond. There's a good chance, who knows what the probability is, but that a 30- year bond, you know, with a 2 1/2 per cent coupon, that bond could sell at 60 very easily sometime in the not too distant future. Who knows?"

The US 30-year debt traded at 2.22 per cent on Jan 30, the lowest yield since at least 1977 when the Treasury began regular sales of the securities.

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