Dallas Fed’s Kaplan Says Jury Is Out on Whether Economy Will Need More Support


Robert Kaplan,

president of the Federal Reserve Bank of Dallas, said Friday he was hopeful that the central bank’s current sequence of rate cuts would be “modest, limited and restrained,” but it was too soon to say whether that would be the case.

“The jury’s out on that,” he said during a moderated question-and-answer session in Washington.

The Fed cut its benchmark rate in July and again in September to its current target range between 1.75% and 2% to cushion the U.S. economy against rising threats to growth from abroad, and officials have left the door open to cut rates again at their Oct. 29-30 meeting.

Mr. Kaplan told reporters Friday he had strongly supported the prior two rate cuts well before each meeting but that he was now agnostic about whether the Fed should proceed with a third rate cut in October. “We have a December meeting also,” he said.

“One argument to me is to take a little bit more time, reserve the right to take additional action if conditions merit it,” he said. “It may be wise to take a little time to assess and continue to turn over a few more cards. That’s what I’m weighing.”

Mr. Kaplan said it would be a mistake for the Fed to signal the likely path of policy beyond any particular meeting—such as by declaring an end to the current sequence of rate cuts—because of the high degree of uncertainty facing the economy. “This is a fluid situation,” he said. “This is a fragile time where this could break either way.”

Investors in interest-rate futures markets have maintained strong expectations of a third interest-rate cut at the rate-setting committee’s October meeting, in part because Fed officials have done little to dispel those expectations.

Mr. Kaplan said the Fed shouldn’t place too much attention on what markets expect the central bank to do at any given meeting. “Market probabilities can change on a dime,” he said.

During the moderated discussion, Mr. Kaplan said the U.S.-China trade war and broader policy uncertainty had been the most recent catalyst of a deceleration in global growth. “It’s not surprising if there’s sand in the gears of global trade, you’re going to have deceleration,” he said.

In response to questions over whether other policy makers were complicating the task of Fed officials by taking steps that could disrupt growth in the short run, Mr. Kaplan said, “I don’t get to deal the cards. My job is to play with the cards that were dealt.”

In face of growing risks to U.S. growth, including from trade uncertainty, Mr. Kaplan said the Fed’s rate stance had become too tight by July. He said he didn’t view the recent rate cuts as the “start of a full-fledged rate-cutting cycle, but I view it as appropriate to adjust the stance of monetary policy in a more limited and restrained way.”

Write to Nick Timiraos at nick.timiraos@wsj.com

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