The Federal Reserve probably will refrain from selling assets from its balance sheet over the next three to five years as the U.S. falls short of a return to full employment, according to Pacific Investment Management Co., manager of the world’s largest fixed income fund.

Writing in the company’s latest Secular Outlook, managing director Josh Thimons said Pimco expects the U.S. economy to grow in a range of 1.5 percent to 2.5 percent per year over the next three to five years. While the economy will benefit from such “pockets of strength” as increased energy output, it will be held back by an “unsustainable fiscal situation,” he said.

As the expansion continues in the coming years, the Fed will begin raising interest rates in a move toward “policy normalization,” Thimons said. The central bank’s target for the federal funds rate, the interest rate that commercial banks charge each other for overnight loans, currently stands near zero.

The Fed’s balance sheet though will “likely be elevated for years to come and the proactive sale of assets is unlikely” over the next three to five years, Thimons added.

The central bank currently is buying $85 billion of debt per month in an effort to boost employment. The purchases have expanded Fed assets to about $3.4 trillion.

The Newport Beach, California-based Pimco has said it is shying away from risky investments because it sees a growing disconnect between the performances of financial markets and the global economy. Its Pimco Total Return Fund suffered the first client withdrawals since 2011 last month as global bond markets tumbled the most in nine years.

Industrial Nations

Thimons said the U.S. economy is “much further along the road to repair” than other developed nations. As such, the dollar may strengthen in the longer term against the currencies of other industrial nations, though it will probably weaken against those of faster-growing emerging markets, he said.

Writing in the same article to be posted on Pimco’s website, executive vice president Lupin Rahman said the medium-term outlook for Latin America is “broadly constructive.”

“We expect overall Latin American growth to be in the 4 percent to 5 percent range and inflation to be relatively contained over the next three to five years,” she said.

Rahman singled out Colombia, Mexico and Peru as probable strong performers over that time frame.