Dallas Fed's Kaplan Sees Costs For Waiting Too Long To Hike Rates

By Greg RobbMarketWatch Pulse

Rob Kaplan, the new president of the Dallas Fed, on Wednesday took a middle-of-the-road stance on interest-rate policy in his first speech, saying the Fed needed to be accommodative but that there were costs with staying at zero for too long. In remarks at the University of Houston, Kaplan backed the Fed's decisions to hold rates steady so far this year, calling the decisions "prudent" in light of the outlook. Factors such as low inflation and an uncertain global environment made it likely for Fed will need to keep interest rates lower than usual, he said. However, "accommodative policy does not necessarily mean a zero fed funds rate," he said. Zero rates can distort investment and business decisions, creating imbalances in investments, inventory and hiring decisions, he added. Kaplan will not be a voting member until 2017.

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