Kaplan Says Fed Has 'Luxury Of Patience' on Further Rate Rises
07 December 2018 - 03:32AM
Dow Jones News
By Michael S. Derby
Dallas Fed leader Robert Kaplan backed away from providing clear
guidance about the interest rate outlook in a television interview
Thursday, a potential signal his appetite for tighter monetary
policy may be waning.
"Normalizing monetary policy was always going to be challenging
and I think we're in the stage of this process where you're going
to hear me shorten up on the prognostications and be much more
vigilant as to what's going on in the economy," Mr. Kaplan said in
the transcript of an interview on CNBC.
"I think we have the luxury of patience. And I'm not going to
judge or predict what we're going to do in the December meeting,"
Mr. Kaplan said.
The central banker was interviewed ahead of a coming
interest-rate setting Federal Open Market Committee meeting that
has long been expected to deliver the fourth rate rise of the year,
as central bankers raise their short-term target rate range in a
bid to keep the economy from overheating.
But over recent weeks uncertainty has crept into the outlook.
While growth and job data continue to look strong, inflation
doesn't appear fixed to break beyond the Fed's 2% target. At the
same time, there are increased worries about global growth, bond
market yields are flashing a yellow signal about the outlook, and
financial markets have been broadly unsettled.
Some Fed officials have already said the Fed should refrain from
boosting rates further. The chiefs of the Philadelphia and
Minneapolis Fed banks have questioned the need for action when
there are no signs of inflation taking off.
On the other side, Fed Chairman Jerome Powell and New York Fed
leader John Williams remain upbeat about the outlook and favor
further rate rises, although they have offered little guidance in
terms of timing.
Mr. Kaplan, who is not currently a voting member of the FOMC,
has long favored slow and steady rate rises, and until recently, he
spoke in favor of the Fed doing about three more increases into
next year before moving to take stock of the economy. He said in an
essay in late October that against the current overnight target
rate range of between 2% and 2.25% he was most likely eyeing a
range of 2.75% to 3%.
He told CNBC that "I think we ought to be very gradual and
patient here. Inflation, in my judgment, isn't running away from
us." He added, "I'm just seeing a high level of uncertainty. And I
think it's a factor in my thinking."
Mr. Kaplan said he expects growth to slow next year as the
influence of recent fiscal stimulus wanes.
"I'm very attuned to the possibility, if not the probability,
that the economy is going to look very different in the first half
of 2019 than it does today, because fiscal stimulus is waning and
we've raised rates eight times over the last 2 1/2 , 3 years," Mr.
Kaplan said. "So I think all of that means we ought to shorten up
on our assessments and be willing to be very patient" on rates.
Mr. Kaplan did note that "I'm not predicting and we're not
predicting a recession."
Write to Michael S. Derby at michael.derby@wsj.com
(END) Dow Jones Newswires
December 06, 2018 11:17 ET (16:17 GMT)
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