Fed’s Kaplan Expects Interest Hike Next Year

The President of the Federal Reserve Bank of Dallas, Robert Kaplan, supports raising interest rates by the end of next year.

Kaplan does not see a problematic surge in inflation soon. However, he expects economic recovery to lead to the reduction of the easing measures and looks forward to normalizing the monetary policy, he told CNBC on Tuesday.

Kaplan expects the American economy to grow by 6.5% in 2021 and unemployment nearing a rate of 4% by the end of the year.

“The forecast has improved, my forecast has improved meaningfully. Having said that, we are still in the middle of the pandemic, and I want to see more than a forecast. I want to see actual evidence that that forecast is going to unfold.”

“As we do, and as we make substantial further progress in meeting our dual mandate goals, I for one am going to be an advocate of beginning the process of moving some of these extraordinary monetary measures and doing it sooner rather than later. But I need to see outcomes, not just a strong forecast.”

Furthermore, Kaplan noted that the Fed would need to decrease asset purchases prior to raising interest rates.