Robert Kaplan Says Fed Should Hold Barring ‘Material’ Change in Outlook
Robert Kaplan Says Fed Should Hold Barring ‘Material’ Change in Outlook
(Bloomberg) -- Two Federal Reserve policy makers reiterated that interest rates are on hold unless there’s a material change in the outlook for the U.S. economy.
Comments Tuesday by Dallas Fed President Robert Kaplan and Boston’s Eric Rosengren reinforce the message from the U.S. central bank last week that policy makers judge they’ve done enough to support growth following three consecutive rate cuts.
“I’ve already got baked into my outlook, we’re going to have weak manufacturing next year, sluggish global growth, pretty sluggish business investment, but with a strong consumer,” Kaplan said in a Bloomberg Television interview with Kathleen Hays and Vonnie Quinn. “There would have to be some material change from that outlook” for him to back a rate change, said Kaplan, a 2020 voter on the policy-setting Federal Open Market Committee.
The committee left rates unchanged at its Dec. 10-11 meeting and signaled it would likely be on hold next year. The decision followed rate cuts at each of the previous three gatherings, designed to offset risks from slowing global growth and trade-policy uncertainty.
Looking ahead, the Dallas Fed chief brushed off concerns about the health of the U.S. consumer.
“I’d been worried that weak business investment and weak manufacturing would seep into other parts of the economy. We haven’t seen that yet,” Kaplan said.
“We’ve got a very tight jobs market, and there’s no evidence I see that the jobs market is doing anything but getting tighter. That’s a pretty good tailwind for the consumer,” he said. “So, unless something changes, that causes the employment picture to change, the consumer is going to be solid for next year.”
Rosengren, who dissented against all three rate cuts this year, struck a similar tone when he spoke a few hours later.
“This is a good time to patiently assess the economy,” he told the Forecasters Club of New York. “In the short run, I do not see a need for additional policy easing unless there is a material change to the forecast.”
He stressed the need to keep an eye on threats to financial stability but also noted that there were still downside risks posed by uncertainty over the global economy and trade policy.
“This outlook assumes that we do not have a significant negative shock from abroad, or experience a negative shock from a sharp ratcheting-up of trade disputes with major trading partners,” he said.
--With assistance from Christopher Condon.
To contact the reporters on this story: Matthew Boesler in New York at mboesler1@bloomberg.net;Nic Querolo in New York at jquerolo1@bloomberg.net
To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alister Bull, Scott Lanman
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