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Dallas Fed's Kaplan: Strong 2020 Growth Forecast Assumes Further Fiscal Aid

FED

A few takeaways from Dallas Fed Pres Kaplan's interview on BBG:

  • He said that the Fed's new statement was more significant than markets realize. This is similar to language from StL's Bullard last week. Some on FOMC clearly believe that markets are underestimating the Fed's ability/resolve to generate inflation.
  • Also of note is that Kaplan said his forecast of strong growth in 2020 assumes some further fiscal support. There is significant doubt on that front, of course.
  • Said he sees the funds rate near zero for 2.5-3 years: unclear whether he is or is one of the 3 on FOMC that saw 'liftoff' at end 2023, but at least we know he's not the one who sees it at end-2022.
  • Then again, he's not exactly dovish, esp on employment front: "FED'S KAPLAN SAYS HE EXPECTS THAT BY 2023 U.S. COULD START TO APPROACH 3.5% UNEMPLOYMENT...SAYS ONCE U.S. GETS TO THE POINT OF LOWER UNEMPLOYMENT, NOT SURE FED NEEDS TO STILL LEAVE RATES AT ZERO" -Rtrs. Others on FOMC have appeared more willing to allow the labor market to run 'hot' before tightening.
  • He explains his FOMC dissent last week by saying that he wasn't sure how much benefit the Fed's new fwd guidance would deliver, and that he believed its costs were not worth the benefits, citing concern over excessive risk-taking.
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