U.S. interest rates are “in the right place” and don’t need to be lowered, although weak inflation merits close watching, according to Robert Kaplan, president and CEO of the Federal Reserve Bank of Dallas.
Overall inflation pressures in the U.S. will remain muted and tweaking monetary policy won’t impact that, Kaplan said in a Bloomberg TV interview in Beijing. He added that some of the cyclical pressures on prices are transitory, matching comments by Fed Chair Jerome Powell, while some pressures are structural.
“We are just going to have to monitor this very carefully but I am not inclined at this point to lower the Fed funds rate to address it,” said Kaplan, who doesn’t vote on monetary policy this year. “I think that is more effective dealing with the cyclical elements of inflation, I am less convinced that it deals that effectively with the structural elements.”
On the renewal of trade tensions between the U.S. and China, Kaplan said the dispute isn’t having a major impact on U.S. economic growth, though he warned that businesses are being forced to reconsider supply chain and logistics operations. Some of them are seeking alternative arrangements in South East Asia and Mexico instead.
“It is not having a substantial material or a impact on U.S. GDP growth at this point but I can tell you across a number of industries it is having some chilling effect on their ability to manage their costs and the way they do business,” Kaplan said.