Economist's Insights

Kaplan Supports 2017 Start for Balance Sheet Unwind, Wants Evidence Inflation Weakness is Transitory:

Jun 20, 2017

Dallas Fed President Kaplan expects growth will bounce back in 2Q and average roughly 2% for 2017, consistent with the trend-rate of the current expansion. According to his paradigm, this should tighten the labor market further, eventually creating wage pressures which should help remedy the sluggish inflation trends. While he doesn’t think the Fed should wait for signs of overheating inflation, he does feel they can afford to be patient for more evidence that recent weakness is transitory. He supports beginning the balance sheet unwind this year but reinforced the fact that the process won’t involve outright sales of assets. In comments aimed at Washington, he admitted the Fed can’t take the place of fiscal reforms but doesn’t believe deficit-financed tax cuts are the answer.