Fed's Kaplan Has 'Open Mind' to One More Rate Increase in December

By Bradley Olson Features Dow Jones Newswires

Federal Reserve Bank of Dallas President Robert Kaplan on Friday said he is open to raising short-term interest rates later this year, but will want to watch how the economy performs for a while before making a decision.

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"I've got an open mind about December, but I want to take a little bit more time" to observe economic data, said Mr. Kaplan, referring to the Fed's final scheduled policy meeting of the year, on Dec. 12-13, during remarks at an energy conference here.

Mr. Kaplan's remarks are among the first public comments from Federal Reserve officials since the central bank's policy meeting Tuesday and Wednesday, when they indicated they still expect to raise rates again, for a third time this year.

The Fed also said Wednesday it would begin in October the process of shrinking a $4.5 trillion portfolio of securities purchased to shore up the U.S. economy before and after the financial crisis.

"I'm confident that the cyclical inflation pressures are building," said Mr. Kaplan, speaking at a conference held by the Federal Reserve banks of Kansas City and Dallas.

Those pressures are being offset by structural economic changes tied to the technological advances, he said.

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"I want to see how these two conflicting forces play out," said Mr. Kaplan, who is currently a voting member of the rate-setting Fedefrl Open Market Committee.

Mr. Kaplan said the U.S. economy may grow more slowly in coming years because the country's population is aging and workforce growth has been slowing.

Although U.S. unemployment is near a 16-year low, Fed officials have continued to express concerns about soft inflation, which can serve as a barometer of economic strength. The Fed's preferred annual inflation gauge, excluding volatile food and energy categories, was 1.4% in July, down from 1.9% in January and below the central bank's 2% target.

Last week, a different inflation measure showed consumer prices climbed 1.9% in August from a year earlier, a move up after months of slower showings. Economists expect data in the months ahead to show inflation rising, propelled by higher gasoline prices due to Hurricanes Harvey and Irma.

Policy makers may take a cautious view of such data given the influence of volatile energy prices in the results.

Write to Bradley Olson at Bradley.Olson@wsj.com

(END) Dow Jones Newswires

September 22, 2017 14:58 ET (18:58 GMT)