He said that he expects the USA economy will grow by 2% to 2.5% in the remainder of the year.
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Based on current Fed forecasts, such an approach would keep US monetary policy on hold until 2018.
Charles Evans, President of Chicago Federal Reserve, finally provided some picture of contrast from his colleagues, including FED Chair Janet Yellen, who over the past few weeks made a strong hawkish case, raising the prospect of a rate hike in summer, probably June or July.
Friday’s report will provide a crucial piece of data for the Federal Reserve to weigh in deciding whether to raise interest rates later this month.
He also said he saw downside risks to his forecasts for 2 percent GDP growth and for inflation to reach the Fed’s 2 percent goal within three years.
The Fed holds its next policy meeting on June 14-15. But the Fed may want additional data to ensure that the improvement is sustained. Although the firm believes policymakers will only raise rates two more times this year, it also believes that they will become more aggressive with their tightening next year.
The firm adds that calculating probability for July is more hard because the FOMC meeting is at the end of the month, which is why they skipped July and looked at August.
“After the sluggish first-quarter annualized growth rate of 0.8 percent is accounted for, this would leave the increase in GDP for 2016 as a whole close to 2 percent – or about the same pace as in 2015”, he said, according to a transcript of his speech.
Speaking to the conference, Mr. Kaplan noted that keeping rates at ultra-low levels comes with a “cost”, most notably in the form of pushing investors into riskier activities and hurting savers.
“It’s appropriate, and I’ve said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate”, she said in response to a question at Harvard’s Radcliffe Institute for Advanced Study.
“June is too early, but September is too late”, Joy said.
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“The slowdown in global economic growth – notably in emerging market economies – and uncertainty about worldwide prospects have contributed to a rising dollar and declining commodity prices since mid-2014”, he said.
