U.S. Fed official says current federal funds rate appropriate

Feb 19, 2020

Washington DC (USA) Feb 19: The U.S. economy is expected to grow at around 2 percent this year and current federal funds rate is "roughly appropriate," a senior Federal Reserve official said Tuesday.
"It is my view that, based on my base-case outlook for the U.S. economy, the current setting of the federal funds rate at 1.5 to 1.75 percent is roughly appropriate," Robert Kaplan, president of the Federal Reserve Bank of Dallas, wrote in an essay published on the bank's website.
"Consistent with this view, my Summary of Economic Projections (SEP) submission in December 2019 indicated that I expected no movement in the federal funds rate through 2020," he said.
Kaplan noted that Dallas Fed economists expected U.S. gross domestic product (GDP) to grow at a rate of approximately 2 to 2.25 percent in 2020.
"This forecast is based on our expectation that global growth is likely to remain sluggish but will show signs of stabilization due to some calming of trade uncertainties," he said, citing the ratification of the United States-Mexico-Canada Agreement, the signing of the China-U.S. phase-one trade deal and some greater clarity regarding Brexit.
However, the delay in production of the Boeing 737 Max airplane is likely to reduce U.S. GDP growth by as much as 0.4 percent annualized in the first quarter of 2020, according to the Fed official.
"The extent of the full-year effect will ultimately be determined by the timing of a return to production, likely later in the year," Kaplan said.
The Fed lowered interest rates three times in 2019, cutting the target range of the federal funds rate by 75 basis points to 1.5-1.75 percent. After wrapping up its first monetary policy meeting of 2020 in late January, the Fed left interest rates unchanged and maintained a wait-and-see stance
Source: Xinhua News Agency