Kaplan Says There Is Good Clarity On Fed's Rate Guidance Already

FED

MNI (Washington)

Dallas Fed chief Rob Kaplan told CNBC that over the next two or three years as we start approaching full employment and price stability "the neutral rate will start drifting up again" from covid lows back to the long-run median 2.5% in the most recent SEP. Comparing it to depressing the accelerator in a car and increasing accommodation even more as the economy nears the Fed's dual mandate goals, Kaplan said "I don't know if that's going to be appropriate."
"I don't know that we will want to be committing to keeping rates at ZERO until we meet these targets, because the amount of accommodation is going to be widening and I don't know if that's going to be appropriate," he said, drawing a distinction between zero rates and "accomodative" rates.
Nevertheless, Kaplan said debate on the FOMC is a good thing, when asked about the many viewpoints from Fed officials on the new forward guidance and operating framework.
"In terms of clarity I think the markets and the public have pretty good clarity right now. The markets expect that the fed funds rate is going to stay at zero probably until 2023." he told CNBC. "That's pretty good clarity for my taste."
Kaplan also again pressed that the U.S. economy needs additional fiscal support and it would create "downside risks" if that additional fiscal aid does not materialize.

MNI Washington Bureau | +1 202-371-2121 | evan.ryser@marketnews.com

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