Kaplan says he will advocate for raising interest rates
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[April 29, 2016]
LONDON (Reuters) - Dallas Federal
Reserve President, Robert Kaplan, on Friday pledged to push for gradual
increases in the U.S. benchmark interest rate, as long as inflation
continues to rise and the U.S. economy remains near full employment.
The Fed, which is charged with the twin goals of maximum employment
and stable inflation, this week kept interest-rate policy on hold
and signaled it was in no rush to raise rates, citing slowing
economic activity despite an improved labor market
Kaplan's remarks were the first from a Fed policymaker after this
weeks Fed rate decision.
"As we continue to make progress in achieving our dual mandate, I
will advocate that we take actions to remove some amount of
accommodation," Kaplan said in remarks prepared for a speech in
London. "I will also advocate that we take these steps in a gradual
and patient manner."
In embracing a slow path toward more normal interest rates, Kaplan
expressed a view that is held widely at the Fed.
In forecasts released last month, all but one of the Fed's 17
policymakers said they believe it will be appropriate to raise rates
at least twice this year, if not more. Traders, by contrast, are
betting on just one rate hike.
The Fed raised interest rates last December for the first time in
nearly a decade, but has kept them unchanged since amid worries over
global economic growth and low inflation.
Kaplan, who will not vote on the Fed policy making committee, the
Federal Open Market Committee, until next year but takes part in
regular policy-setting meetings every six weeks or so, forecast U.S.
gross domestic product growth this year at 2.0 percent, a slightly
faster pace than he projected just last month.
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U.S. employers, he added, can continue to add jobs at a "healthy"
pace without overheating the economy, in large part because of a
global labor surplus that is putting downward pressure on inflation.
But Kaplan also expressed confidence that inflation, which has
undershot the Fed's 2.0-percent target for years, will return to
that level over the medium term as the downward pressure from a
strong U.S. dollar and cheap oil abates.
"I do believe that the effort to 'normalize' monetary policy is
important and that excessive accommodation has a cost in terms of
creating distortions in investing, hiring and other decisions which
can create unhealthy imbalances," he said.
(Reporting by Marc Jones, David Milliken and; Ann Saphir; editing by
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