“What we do in 2019 will turn out to be more significant than whether 2.25 to 2.5 is too far,” he said. Fed critics, including President Donald Trump, urged it not to hike last month.
The median forecast of Fed officials updated at their Dec. 18-19 meeting projected two rate increases in 2019, down from three at their September meeting. The Fed is trying to balance the risk that very-low unemployment spurs higher inflation with the many risks that cloud the horizon.
Kaplan said inflation “is not running away from us,” and while the question of a rate cut had not entered his mind, he does favor patience in this environment.
“Some of these market forces, including financial conditions, can spill over and tighten the economy and cause growth to slow and it’s critical that we are very attuned to it,” he said, noting that yields on two-year Treasury notes have slipped below one-year yields, suggesting that investors have an outlook for "very sluggish" growth in 2020.
“This is a very critical time,” he said. “Patience is a critical tool we should be using during this period. We can get this right.”
This article provided by Bloomberg News.