Texas won’t have a high-profile critic of easy money within the Federal Reserve system anymore, it appears.
Robert Steven Kaplan, the newly installed president of the Federal Reserve Bank of Dallas, mostly endorsed the views of Federal Reserve Chairwoman Janet Yellen in his first speech as head of the regional bank Wednesday.
Speaking at an event at the University of Houston, Kaplan said that “it will likely be appropriate that U.S. monetary policy remain accommodative for some time.” His comments generally indicated that he was supportive of the Fed’s current tentative plans to raise its interest rate target from zero slowly, although he is not a member of the monetary policy committee.
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In contrast, Kaplan’s predecessor, Richard Fisher, was known as the most outspoken critic of the Fed’s stimulus efforts during his tenure. Fisher was known not only for objecting to the Fed’s zero-rate policy and its quantitative easing programs, but also for making his points using colorful metaphors in public speeches.
Kaplan was announced as the new head of the Dallas Fed in August, with his views on monetary policy unknown.
Previously, he taught as a professor at Harvard Business School, where he wrote several books on business leadership. Before that, he was a banker at Goldman Sachs.
In his speech, Kaplan did note that too-low interest rates could harm the economy by creating “distortions” in markets and business decisions.
He also referred to the five years he spent in Asia in the 1990s to explain that he would pay particular attention to overseas events in influencing monetary policy. He argued that China faces long-term slowing growth, not just a temporary downturn.
Slowing growth abroad, he suggested, could hold down U.S. inflation even as domestic unemployment drops below the level that most economists would think represents a fully healthy economy.
Currently, Fed officials are trying to sort out the causes of below-target inflation in the U.S. The main view at the Fed is that inflation will rise from near zero currently to the Fed’s 2 percent target as unemployment falls and the temporary effects of falling oil prices and a strengthening dollar dissipate.
