Patience is a virtue, and that includes understanding the economy and monetary policy.
That’s a key point by Rob Kaplan, president and CEO of the Federal Reserve Bank of Dallas, whose new essay recommends a wait-and-see approach before changing fiscal policy.
“I believe it would be prudent for the Fed to exercise patience and refrain from taking further action on the federal funds rate until the economic outlook becomes somewhat clearer,” Kaplan writes.
“I expect we will get some further clarity during the first half of 2019,” he adds in the essay titled, “The Value of Patience,” posted to the Dallas Fed website.
Kaplan, who’s been in his current position since 2015, observes he anticipates inflation to remain “somewhat muted in 2019. I don’t expect inflation to run away from us.”
His expectations are based on beliefs that “structural forces of automation, technology-enabled disruption and globalization will continue to offset, at least in part, the cyclical pressures created by a historically tight labor market.”
“As a result,” he adds, “I believe the Fed has the luxury of being patient over the next several months. Exercising patience will be critical if we are to achieve our dual-mandate objectives of maximum sustainable employment and price stability.”
In addition to patience, vigilance is also necessary, Kaplan asserts. Economic variables that “bear close scrutiny” include slowing global growth; weakness in interest-sensitive industries in the U.S.; slowing manufacturing activity, as indicated by the latest national and regional surveys of manufacturing activity; and a decline in consumer sentiment.
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