Fed's Kaplan says weak data shows there's no need for April rate hike

Mr Robert Kaplan, president and chief executive officer of the Federal Reserve Bank of Dallas, speaking at a luncheon at Louisiana Tech University.
Mr Robert Kaplan, president and chief executive officer of the Federal Reserve Bank of Dallas, speaking at a luncheon at Louisiana Tech University. PHOTO: BLOOMBERG

ATLANTA (BLOOMBERG) - Federal Reserve Bank of Dallas president Robert Kaplan said he doesn't back an interest-rate increase this month (April) in light of a puzzling weakening of economic growth, though a June tightening by the US central bank remains a possibility.

"It is worth in this environment being patient and basically being willing to be cautious and let events unfold," Mr Kaplan told reporters after a speech on Monday (April 11) in Ruston, Louisiana. "We'll know soon enough. We are not going to know by April. There is time for us to make these assessments over the next few months and we will."

The policy-setting Federal Open Market Committee meets on April 26-27 and June 14-15. Investors have lowered the odds of a move at either meeting after chair Janet Yellen said on March 29 that central bankers should "proceed cautiously" amid heightened global economic risks.

Officials are discussing how quickly they should raise rates a second time following their initial hike in December, when they lifted rates held near zero since 2008, amid signs the US economy appears to have slowed in the opening months of the year. The Atlanta Fed's GDPNow forecasting model currently estimates growth at an annual rate of just 0.1 per cent in the first quarter.

"There is no question first-quarter GDP numbers are weak," said Mr Kaplan, referring to gross domestic product, "and probably inconsistent with the job numbers" which show "solid" employment gains. Even so, he said it was likely that growth will pick up in the final three quarters of the year, based on his expectation of stronger consumer spending.

"Being patient and cautious doesn't mean standing still," the Dallas Fed leader said. "There is a point at which I will be advocating to take the next step, but it is not now."

The FOMC decided last month to hold off from raising interest rates, while policymakers halved their forecasts for the number of rate increases that would be warranted this year from the four moves they projected in December.

"I am certainly very open" to the possibility of a June move, said Mr Kaplan. "I am not a big fan of predicting what my judgment is going to be" far in advance. "I am certainly open minded and will be making a judgment" as reports come in.