Fed's Robert Kaplan Urges Rate-Hike Patience for ‘Months, Not Weeks’

(Bloomberg) -- Federal Reserve Bank of Dallas President Robert Kaplan said he wants the U.S. central bank to take its time and watch how the economy evolves before it lifts interest rates again -- but he’s not ready to call an end to the hiking cycle.

“I don’t think we should be prejudging or be predetermined about what we’re going to do -- I do think though, for some period of time, and we’ll see what that time is, I think it’d be wise to be patient,” Kaplan told reporters in Plano, Texas, on Tuesday. “I’ve said a quarter or two, I don’t know -- we’ll figure out in hindsight which it is -- but I think it’s in the matter of months, not weeks.”

The Fed has lifted rates nine times since the end of 2015, including four rate increases last year. The Dallas Fed chief, who next votes on policy in 2020, said he thinks what happens next is far more important than the policy tightening so far.

Kaplan pointed to tighter financial conditions, slower global growth and early signs of weakness in some cyclical industries as reasons for patience in making additional rate increases. He said he’s watching the Fed’s balance-sheet unwind very carefully, and indicated that the Fed should be open to making adjustments to that plan -- now on autopilot -- if needed.

He also said it’s possible the Fed could struggle to hit its 2 percent inflation target during the next economic downturn as structural forces such as globalization drag prices lower.

“The notable thing is that inflation has not been running higher,” Kaplan said. “The challenge for the Fed may be as much meeting our 2 percent inflation target.”

To contact the reporter on this story: Jeanna Smialek in New York at jsmialek1@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net, Sarah McGregor

©2019 Bloomberg L.P.