Fed’s Kaplan, citing low inflation, urges patience on rate hikes

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Robert Kaplan, president of the U.S. Federal Reserve Bank of Dallas.

Dallas Federal Reserve Bank President Robert Kaplan on Thursday advocated a go-slow approach to further U.S. interest-rate hikes, saying he wants to see more evidence that inflation is heading back up to the Fed’s 2-percent goal.

Kaplan said he believes that the U.S. economy will likely grow slightly faster than 2 percent this year, squeezing the remaining slack out of an already tightening labor market and putting upward pressure on inflation.

But he struck a more cautious note than Fed Chair Janet Yellen, saying that while he believes recent weak inflation could well be transitory, he is open-minded to the possibility that it is not.

“I would like to see some greater evidence that we are making progress toward meeting our 2 percent inflation objective in the medium term,” he said in an essay published to update his views on the economy and monetary policy. “Future removals of accommodation should be done in a gradual and patient manner.”