Fed’s Kaplan: Full employment, healthy economy may trigger another rate hike

U.S. GDP grew at rates of 3.1% and 3.0% in the second and third quarters of this year, respectively. Despite steady growth, inflation has yet to reach the Fed’s target of 2%, though Dallas Fed President Robert Kaplan says he is actively considering another interest rate increase.

According to Kaplan, the Dallas Fed’s GDP forecast for the year is 2.5%, “sluggish by historical standards but certainly enough to continue to take slack out of the labor market.”

Kaplan, in an exclusive FOX Business Network interview, told Maria Bartiromo, “The reason I’ve said I’m actively considering next steps is we are at or near full employment and my own projection, our projection at the Dallas Fed is we’re likely to overshoot maximum, sustainable employment.”

Though inflation is falling short of the Fed’s target, Kaplan sees the overshoot in employment as a factor that needs to be considered.

Kaplan then explained that technology is a key headwind to the rise in inflation.

“Part of what’s going on is because we’re taking slack out of the labor market, we’re getting toward full employment, you do have cyclical pressures. We haven’t seen it show up in wages or prices in my opinion because we’ve got a very strong structural headwind and that’s primarily what I call ‘technology enabled destruction,’ to some extent globalization, but mainly disruption.”