May 13, 2019 / 6:04 PM / a month ago

Fed's Kaplan says interest rates are about where they should be

FILE PHOTO: Dallas Federal Reserve Bank President, Robert Kaplan, stands on a stage at Stanford UniversityÕs Hoover Institution where he is attending an annual monetary policy conference in Stanford, California, U.S., May 4, 2018. REUTERS/Ann Saphir

BROWNSVILLE, Texas (Reuters) - Dallas Federal Reserve Bank President Robert Kaplan on Monday said that the Fed should neither be cutting nor raising interest rates but should “move off to the side and be patient.”

“We’ll have to see where we go from here, and I’ll keep updating my judgment based on what we see in the economy,” Kaplan said at the University of Texas Rio Grande Valley. Interest rates, he said, “are about where they should be.”

Kaplan’s comments came after China’s announcement of retaliatory tariffs on U.S. goods fueled fears of a full-blown trade war between the two biggest world economies. U.S. stocks tumbled, and interest-rate futures traders piled into bets the Fed will cut rates before the end of this year.

Kaplan did not address the market gyrations or the latest trade tension headlines in his talk. He instead reiterated his view that globalization and trade boost rather than hurt the U.S. economy, and said he is hopeful that the United States and China can resolve current tensions.

“Trade is very critical,” Kaplan said, adding that tariffs on traded goods throw “sand in the gears” of companies that use those goods in their supply chains.

With inflation near the Fed’s 2 percent target and unemployment at 3.6 percent, he said, and with interest rates now “in the neighborhood of neutral,” the Fed does not need now to make any adjustments to rates. The Fed currently targets interest rates at between 2.25 percent and 2.5 percent.

Kaplan does not have a vote this year on monetary policy but takes part in the Fed’s regular policy-setting meetings in Washington.

Reporting by Ann Saphir; Editing by Steve Orlofsky

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