Robert Kaplan
Hailey Lee | CNBC
Dallas Fed Robert Kaplan designated on his fellow central bankers to continue to be patient as economic events unfold before making changes to interest classes.
In an essay delivered Monday, Kaplan said he is watching factors such as the U.S.-China trade tensions as well as decelerating universal growth and whether they will lead to “a material deterioration” of domestic activity.
“At this stage, I believe it is too primitive to make a judgment on this question,” he wrote. “These heightened uncertainties have intensified over the past seven weeks, and it is certainly practicable that events could occur in the near future which would substantially reduce these uncertainties.”
Ergo, as it pertains to policy, “I believe it would be wise to take additional time and allow events to unfold as we over whether it is appropriate to make changes to the stance of U.S. monetary policy.”
Kaplan is a nonvoting member this year of the Federal Persuasible Market Committee, which sets monetary policy for the central bank. However, he is allowed input at meetings and ensconces one of the “dots” on the Fed’s chart of individual members’ expectations for where rates are headed over the next several years.
His look ats come just days after the committee held the line on rates but provided indication that future agrees are forthcoming if conditions weaken. Markets are counting on possibly three rate cuts before the end of the year, with the earliest in late July.
Despite market expectations, Kaplan said he is concerned about making policy too lose now.
“I am distressed that adding monetary stimulus, at this juncture, would contribute to a build-up of excesses and imbalances in the economy which may in the long run prove to be difficult and painful to manage,” he wrote.
Companies in Kaplan’s district are reporting issues with tariffs, with various than half saying the duties imposed by President Donald Trump on steel, aluminum and many products from China are increasing input costs and issuing a reduction in capital spending plans.
But he said the economy otherwise looks strong while inflation may not be as weak as the Fed’s like better gauge suggests at just 1.5%, short of the Fed’s 2% goal.