Economist's Insights

Thursday Fedspeak Lands on the Patient Side of the Inflation Debate

Aug 17, 2017

It was more of the same from Kaplan on Thursday. He wants to be patient before raising the target rate range again, allowing time for more evidence that inflation will return to the 2% target in the medium term. He also discussed the dynamics behind an aging and slower-growing workforce weighing on economic growth. He pointed to the 10-year yield as a sign that markets also have an unspectacular outlook for economic growth. Minneapolis Fed President Kashkari overlapped Kaplan’s comments and touched on the same topics with an even less sanguine tone. Kashkari said the math doesn’t work for fast GDP growth, that there’s no need to cool the economy, and that low rates are here to stay. While the expectation remains that the Fed will announce slowing of reinvestments in September, Kashkari said they will be keeping an eye on the debt ceiling debate as they consider the timing.