Jim Rogers: Fed understates inflation | Reuters

Jim Rogers: Fed understates inflation | Reuters



(Reuters) - U.S. government inflation data is "a sham" and is causing the Federal Reserve to vastly understate price pressures in the economy, influential U.S. investor Jim Rogers said on Tuesday.

The U.S. central bank uses inflation data that relies too heavily on housing prices, Rogers told the Reuters 2011 Investment Outlook Summit, and he criticized the Fed's $600 billion bond-buying program.

Rogers, who rose to prominence after co-founding the now defunct Quantum Fund with billionaire investor George Soros some four decades ago, said he was betting against U.S. Treasuries. "I expect interest rates in the U.S. to go much, much, much higher over the next few years," he said.

The core personal consumption expenditure index, which removes food and energy costs, is the Fed's favored measure of inflation and was flat in October for the second straight month.

"Everybody in this room knows prices are going up for everything," Rogers told the Reuters Summit.

The Fed began its $600 billion bond buying program last month, its second round of quantitative easing, to boost a sluggish U.S. economy, citing excessively low inflation and high unemployment.

The Fed has held short-term rates near zero since late 2008, and the 10-year Treasury yield hit 3.18 percent on Tuesday, its highest since July.

STILL BULLISH ON COMMODITIES

On commodities, Rogers said he remains bullish in general, particularly given loose monetary policies and high debt levels in the United States and other Western economies.

"If the world economy gets better, commodities are going to go up in price because there are shortages. If the world economy does not get better, you should own commodities, because (central banks) are going to print more money," he said. "Real assets are the way to protect yourself.

Rogers also said the price of gold will rise eventually above $2,000 an ounce. The price of spot gold on Tuesday hit a record high of $1,430.95 an ounce before falling back to close at $1,409.35.

YUAN ATTRACTIVE, EURO'S DAYS MAY BE NUMBERED

Among currencies, Rogers said the Chinese yuan is the most attractive, and, when pressed, forecast that Beijing would probably allow full convertibility by 2013.

Though China manages the value of its currency, it began letting it rise more rapidly against the dollar this year. The dollar is down 2.7 percent against the yuan so far this year, after barely budging in 2009.

Rogers called the European Union's 85 billion euro bailout for Ireland bad morally and "bad economics," and said the mishandling of Europe's debt crisis could spell the eventual end of the common currency,