Fed's Kaplan: No further rate cuts this year, one rate cut next year


  • Kaplan: Have pencilled in no further rate cuts this year, one rate cut next year.
  • Rate cuts this year make it more likely 10-year yield will rise.

Dallas Federal Reserve's President Robert Kaplan on Friday has been crossing the wires throughout the afternoon, earlier arguing that economies need a broader menu of other policy tools than just monetary policy, expecting the economy to expand by 2% in 2019 and around 1.7% in the second half of the year. 

In more recent trade, Kaplan has made the following remarks:

  • Have pencilled in no further rate cuts this year, one rate cut next year.
  • Agnostic about further rate cuts this year; Not opposed, nor leaning toward it.
  • To be open-minded is watching how trade tensions unfold, does not want to prejudge.
  • Rate cuts this year make it more likely 10-year yield will rise.
  • Should ‘seriously examine’ plans to allow b/sheet increase with growth in demand for reserves.

FX implications:

In a world of central banks easing across all corners of the globe, should the Fed pause in their easing cycle, markets will be attracted to the divergence trade in the Dollar. Today, the Greenback has stabilised in the correction from the session highs of 98.64 and trades +0.15% higher on the day at 98.50 at the time of writing. 

 

 

 

 

 

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