By Michael S. Derby 

Federal Reserve Bank of Dallas President Robert Kaplan said Thursday improving U.S. economic growth is unlikely to change his view that short-term interest rates are where they should be.

"For the time being, I don't see any reason to change our policy setting, " Mr. Kaplan said Thursday in conference call interview with The Wall Street Journal.

Mr. Kaplan spoke after recent government reports showed U.S. consumer spending rebounded in March and the country's trade deficit narrowed in February, signs that economic growth was stronger in the first quarter than previously estimated.

Fed officials left their benchmark interest rate unchanged last month in a range between 2.25% and 2.5%, and signaled they are likely to hold it steady this year amid muted inflation pressure and concern about the slowing global economy.

Mr. Kaplan has supported the Fed's move to the sidelines and said Thursday he sees no inflation threat.

"I don't think inflation is running away from us" and will likely end the year around the Fed's 2% target based on a Dallas Fed measure that aims to gauge the underlying inflation trend, he said.

He said the Fed could hold its benchmark rate "in the neighborhood of where it is for some period of time" even if the economy keeps growing at its current solid pace because he doesn't expect inflation to take off.

The Atlanta Fed's closely watched GDPNow real-time growth tracker has shown steadily improving estimates since earlier in the year and was revised higher Thursday to indicate the economy grew at a robust 2.8% annualized rate in the first quarter. Macroeconomic Advisors' tracker sees a similar gain.

J.P. Morgan economist Michael Feroli told clients in a note Thursday that in the wake of good retail sales data, he was bumping his forecast for the first quarter up to 2.9%, from his prior estimate of 2%.

Mr. Kaplan declined to say what would cause him to argue for lower rates, but he did say 1.5% inflation would certainly catch his attention in a way that could put rate cuts on the table. So-called core prices, which exclude volatile food and energy items, rose 1.8% in January from a year earlier.

In other comments, Mr. Kaplan said that while he doesn't see high corporate borrowing as a broad threat to the economy and financial system, it could still amplify shocks.

Mr. Kaplan doesn't currently hold a voting seat on the central bank's rate-setting Federal Open Market Committee.

Write to Michael S. Derby at michael.derby@wsj.com

(END) Dow Jones Newswires

April 18, 2019 16:38 ET (20:38 GMT)