Fed’s Kaplan Would Have Supported Increase in Rates Last Week

  • Dallas Fed chief declines to say if he would have dissented
  • Kaplan worried that reach for yield is bringing distortions

Federal Reserve Bank of Dallas President Robert Kaplan said he would have backed an interest-rate increase at the U.S. central bank’s meeting last week, when his colleagues voted to leave policy on hold.

“I would have been comfortable in seeing some removal of accommodation in September,” Kaplan told the Independent Bankers Association of Texas meeting in San Antonio on Monday. While there aren’t signs the U.S. economy is overheating, “I am concerned about distortions rates this low are creating,” he said.

The Sept. 21 decision to keep rates steady split the FOMC, with three regional Fed presidents dissenting from the vote to hold rates unchanged. The target for the benchmark federal funds rate has been held in a range of 0.25 percent to 0.5 percent since December, when it was raised by a quarter point, ending almost a decade near zero.

Kaplan, who will be a voting member of the policy-setting Federal Open Market Committee for the first time in 2017, declined to say whether he would have dissented at last week’s meeting if he had been a voter this year.

People are moving to “more risk-oriented assets” in response to low rates, Kaplan told reporters after his speech.

“Commercial real estate is another area” which regulators are focused on, he said. “We watch it very carefully.”

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