Dallas Fed president says current rates appropriate, emphasizes fiscal policy to grow

Robert Kaplan, president and CEO of the Federal Reserve Bank of the Dallas, said on a call with the Wall Street Journal on Thursday that he believes the current federal funds rate is appropriate for the economy and that he does not see a reason for the Fed to change policy. less Robert Kaplan, president and CEO of the Federal Reserve Bank of the Dallas, said on a call with the Wall Street Journal on Thursday that he believes the current federal funds rate is appropriate for the economy ... more Photo: Melissa Phillip, Staff / Houston Chronicle Photo: Melissa Phillip, Staff / Houston Chronicle Image 1 of / 1 Caption Close Dallas Fed president says current rates appropriate, emphasizes fiscal policy to grow 1 / 1 Back to Gallery

Robert Kaplan, president of the Federal Reserve Bank of Dallas, said Thursday that he does not see any reason in current economic conditions to raise interest rates.

Kaplan, speaking on a call with the Wall Street Journal, said he needed more time to evaluate growth in 2019, but the keeping the Fed's benchmark interest rate between 2.25 and 2.5 percent is an "appropriate policy setting for this economy."

He said he is less concerned about China's economic slowdown than previously as recent indicators have showed signs of stability. But, concerns about slowing global growth remain as the European economy remains sluggish, he said.

Trade tensions also remain, some of which he conceded may get resolved in the near future, but they are still affecting business decisions.

Kaplan said he had anticipated economic growth would slow in 2019 compared to 2018, and that the series of interest rate increases last year were probably a factor in the market turmoil in the fourth quarter of 2018, when stock indexes posted the worst losses since the 2008 financial crisis.

Times are changing

He said on the call that growth is likely being restricted by structural changes in the American economy, such as rapid technological innovation that has both created slack in the labor force as businesses replace workers with technology and given consumers more pricing power. He also noted the United States' inability to keep up with skilled labor training. But, these structural economic changes require broader policy measures than are available to the Fed.

"In a world where the population is aging and the U.S. lags in math, science and reading," he said, "we need a broader range of policies beyond just monetary."

On the call, he reiterated his concerns about rising corporate debt that could amplify an economic downturn, but do not, in his view, pose a systemic risk.

The Federal Open Market Committee, the central bank's monetary policy-setting body, will meet at the end of April to deliberate on rates. The last meeting was March 20, in which the FOMC maintained the target rate of 2.25 to 2.5 percent. Kaplan does not hold a voting seat on the committee.

erin.douglas@chron.com

Twitter.com/erinmdouglas23