Fed’s Kaplan Says Weak Data Show There’s No Need for April Hikeby
Dallas Fed leader says he is still open minded about June hike
Economy calls for `being patient' and `cautious,' Kaplan says
Federal Reserve Bank of Dallas President Robert Kaplan said he doesn’t back an interest-rate increase this month in light of a puzzling weakening of economic growth, though a June tightening by the U.S. central bank remains a possibility.
“It is worth in this environment being patient and basically being willing to be cautious and let events unfold,” Kaplan told reporters after a speech Monday in Ruston, Louisiana. “We’ll know soon enough. We are not going to know by April. There is time for us to make these assessments over the next few months and we will.”
The policy-setting Federal Open Market Committee meets April 26-27 and June 14-15. Investors have lowered the odds of a move at either meeting after Chair Janet Yellen said on March 29 that central bankers should “proceed cautiously” amid heightened global economic risks.
Officials are discussing how quickly they should raise rates a second time following their initial hike in December, when they lifted rates held near zero since 2008, amid signs the U.S. economy appears to have slowed in the opening months of the year. The Atlanta Fed’s GDPNow forecasting model currently estimates growth at an annual rate of just 0.1 percent in the first quarter.
“There is no question first-quarter GDP numbers are weak,” said Kaplan, referring to gross domestic product, “and probably inconsistent with the job numbers” which show “solid” employment gains. Even so, he said it was likely that growth will pick up in the final three quarters of the year, based on his expectation of stronger consumer spending.
“Being patient and cautious doesn’t mean standing still,” the Dallas Fed leader said. “There is a point at which I will be advocating to take the next step, but it is not now.”
The FOMC decided last month to hold off from raising interest rates, while policy makers halved their forecasts for the number of rate increases that would be warranted this year from the four moves they projected in December.
“I am certainly very open” to the possibility of a June move, said Kaplan. “I am not a big fan of predicting what my judgment is going to be” far in advance. “I am certainly open minded and will be making a judgment” as reports come in.