–Dallas Fed President Says Businesses Face ‘Gut Check’ in August/September
NEW YORK (MaceNews) – Dallas Fed President Robert Kaplan said Monday he is dubious about suggestions the Fed target interest rate levels along the US Treasury yield curve as a policy tool.
Kaplan, responding to a question during a web appearance, said he would not rule out yield curve targeting, but “I have a little skepticism,” and would be concerned about introducing distortions into the Treasury yield curve.
Interest rates are “muted,” he said, and “I would need to see evidence of the reason to do (yield curve control).”
Responding to other questions, Kaplan said high-frequency indicators including cell-phone mobility data and credit card spending suggest a rebound is occurring. Kaplan’s own conversations with executives show business is improving, and the Paycheck Protection Program has been effective in helping keep employees on payrolls, if only on a part-time basis, he said.
Businesses face a “gut check” in August and September to gauge whether business conditions are improving enough to allow businesses to sustain the recovery and keep employees on payrolls, Kaplan said.
After a disastrous second quarter, the economy is rebounding headed into the summer but the outlook depends on good health practices, he said. These measures include mask wearing, contact tracing, and other efforts where the US is lagging other countries, Kaplan said.
Kaplan called spending on good health practices the best possible investment as they are required to allow reopening to proceed.