February 6, 2020 / 3:55 PM / 11 days ago

Fed's Kaplan says he expects solid U.S. growth this year

FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan speaks at the Commonwealth Club in San Francisco, U.S., October 11, 2019. REUTERS/Ann Saphir/File Photo

DALLAS (Reuters) - Dallas Federal Reserve Bank President Robert Kaplan said on Thursday that he expects “solid” economic growth this year, as easing trade tensions have lessened downward pressure on global growth, manufacturing and business investment.

Kaplan worried last year that trade uncertainty would weigh on consumer spending more than it turned out to have done, he told a University of Texas at Austin’s McCombs School of Business group.

But with the U.S. inking an initial trade deal with China, “we think we are going to have a solid year of growth in 2020” of about 2.25%, he said. Still, he said, his outlook would be firmer were it not for the “wildcard” of the new coronavirus in China and the situation at Boeing.

The new virus, which causes flu-like symptoms, has killed hundreds and infected tens of thousands, mostly in China. Efforts to slow the spread, including factory closures and severe travel restrictions, could disrupt supply chains especially for electronics producers.

For China, Kaplan said, “in the near term it will have a serious impact, but if it’s not persistent and it turns out to be temporary — which I think is likely — this will turn out to be manageable.”

Boeing (BA.N), a top U.S. exporter, earlier this year suspended production of its troubled 737 MAX jetliner, leading to layoffs at least one parts supplier and uncertainty among its own workers.

The Fed cut interest rates last year to a target range of 1.5% to 1.75% to help insulate the economy from the effects of slower global growth and trade policy uncertainty. This year most policymakers believe no further action will be needed.

Reporting by Ann Saphir; Editing by Chizu Nomiyama

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