NEW YORK (MaceNews) – Dallas Fed President Robert Kaplan, a voting member of the Federal Open Market Committee in 2020, Tuesday said interest rates are fine where they are and are likely to remain on hold next year.
“I think the appropriate path of policy is to stay where we are,” Kaplan said during an appearance at the Council on Foreign Relations, adding that other members of the FOMC share his view and his expectation for moderate growth, close to 2%.
Kaplan said inflation pressures are being restrained by structural changes, which allow the labor force to run tighter without price pressures heating up. “We expect inflation pressures to remain muted by structural forces, and we think those forces are increasing,” he said, referring to the aging workforce, technological innovation, and globalization.
Asked by reporters after his appearance what would prompt a shift in the Fed’s stance, Kaplan said, “it would have to be a material change in the outlook for GDP, inflation, the path of unemployment …. If I saw we were likely to grow below potential,” it would call for a reassessment, he said.
He called the balance of risks now “more balanced” heading into the new year.
Asked by Mace News about the impact of the recent tentative phase-one US-China trade agreement and the UK election outcome, Kaplan responded, “time will tell,” and he said he would watch to see how much the news, along with progress on the USMCA, removes the uncertainty and lack of visibility that has limited business fixed investment.
It was possible the UK vote means “some of the worst downside risks from Brexit are off the table,” Kaplan said. “To the extent things have stabilized, I think that’s helpful …. If that’s what’s happening, time will tell,” Kaplan said.
Kaplan said global trade uncertainty was much wider than the US-China trade friction. He called global trade a key risk factor, and said he would watch it closely. “I’m hoping if there is stabilization in trade, there would be stabilization in global growth,” he said.