Kaplan was speaking in a US media interview on his outlook for the US economy and Federal Reserve monetary policy.
He expects the FOMC will leave Fed Funds unchanged at the September meeting (on the 19th and 20th). As for rate cuts on the way:
- I think an estimate that by the middle of next year, they’ll feel that it’s appropriate to cut rates isn’t unreasonable
- I don’t know if it’ll turn out that way. But that’s as good as expectation is any I think at this point
Kaplan added, though, that fiscal developments could see the Fed hold rates higher for longer, saying high levels of government spending will put pressure on bond yields
- That’s the ‘x’ factor that’s hard for me to gauge
Kaplan got himself in trouble with his trading activities whilst head of the Dallas Fed, and resigned. As far as his economic outlook goes though, he was a lone and early voice warning that inflation was not transitory and the Fed should cut back on easing. No one around the FOMC table listened to him. Which was a shame, the FOMC eventually, finally, had to raise rates to combat the CPI surge. Over and over again.
