Dallas Fed's Kaplan Says Jury Is Out on Whether Central Bank Has Provided Enough Support
October 18 2019 - 1:29PM
Dow Jones News
By Nick Timiraos
WASHINGTON -- Robert Kaplan, president of the Federal Reserve
Bank of Dallas, said Friday he was hopeful that the central bank's
current sequence of rate cuts would be "modest, limited and
restrained," but it was too soon to say whether that would be the
case.
"The jury's out on that," he said during a moderated
question-and-answer session in Washington.
The Fed cut its benchmark rate in July and again in September to
its current target range between 1.75% and 2% to cushion the U.S.
economy against rising threats to growth from abroad, and officials
have left the door open to cut rates again at their Oct. 29-30
meeting.
Mr. Kaplan told reporters Friday he had strongly supported the
prior two rate cuts well before each meeting but that he was now
agnostic about whether the Fed should proceed with a third rate cut
in October. "We have a December meeting also," he said.
"One argument to me is to take a little bit more time, reserve
the right to take additional action if conditions merit it," he
said. "It may be wise to take a little time to assess and continue
to turn over a few more cards. That's what I'm weighing."
Mr. Kaplan said it would be a mistake for the Fed to signal the
likely path of policy beyond any particular meeting -- such as by
declaring an end to the current sequence of rate cuts -- because of
the high degree of uncertainty facing the economy. "This is a fluid
situation," he said. "This is a fragile time where this could break
either way."
Investors in interest-rate futures markets have maintained
strong expectations of a third interest-rate cut at the
rate-setting committee's October meeting, in part because Fed
officials have done little to dispel those expectations.
Mr. Kaplan said the Fed shouldn't place too much attention on
what markets expect the central bank to do at any given meeting.
"Market probabilities can change on a dime," he said.
During the moderated discussion, Mr. Kaplan said the U.S.-China
trade war and broader policy uncertainty had been the most recent
catalyst of a deceleration in global growth. "It's not surprising
if there's sand in the gears of global trade, you're going to have
deceleration," he said.
In response to questions over whether other policy makers were
complicating the task of Fed officials by taking steps that could
disrupt growth in the short run, Mr. Kaplan said, "I don't get to
deal the cards. My job is to play with the cards that were
dealt."
In face of growing risks to U.S. growth, including from trade
uncertainty, Mr. Kaplan said the Fed's rate stance had become too
tight by July. He said he didn't view the recent rate cuts as the
"start of a full-fledged rate-cutting cycle, but I view it as
appropriate to adjust the stance of monetary policy in a more
limited and restrained way."
Write to Nick Timiraos at nick.timiraos@wsj.com
(END) Dow Jones Newswires
October 18, 2019 13:14 ET (17:14 GMT)
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