Economist's Insights

Kaplan Sees Three Hikes This Year to Avoid Playing Catch Up

Jan 10, 2018

Dallas Fed President Kaplan expects to see a little more wage pressure in 2018 and, despite some headwinds from technology, said cyclical inflation pressures are no doubt building. Kaplan said, “We’re going to have to watch, because we want to avoid a situation where we have such an overheating that we’re playing catch-up. …Cyclical pressures are building substantially, and they will offset some of the structural headwinds. We will have to see.” As to what this means for rates, he added that three hikes this year is still a good base case. On growth, Kaplan noted that the tax cuts could boost business investment but cautioned that possible resultant increases in the national debt are a concern. Ultimately, Kaplan expects any tax-related boost to be fleeting based on his out year GDP forecasts of 2.2% for 2019 and 1.8% in 2020.