May 25, 2018 / 5:48 PM / in 25 days

Fed's Kaplan 'hopeful' rate-setting tweak will address issue

DALLAS (Reuters) - Dallas Federal Reserve Bank President Robert Kaplan on Friday said he is “hopeful” that a potential change to a key Fed interest-rate target will keep the Fed’s policy rate closer to target.

FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan gestures during a news conference after of the True Economic Talks event in Mexico City, Mexico, July 14, 2017. REUTERS/Edgard Garrido/File Photo

In minutes of its last meeting, Fed officials indicated they are prepared to leave one of its key interest rates 0.05 of a percentage point lower than usual when it next decides to tighten policy, likely in June.

“It’s an adjustment that will help us better set the Fed funds rate, and I’d be hopeful that this adjustment will address that issue,” Kaplan told reporters on the sidelines of a conference here. “We’ll continue to monitor it.”

The U.S. central bank’s key policy rate, the fed funds rate, usually hovers in the middle of a 0.25-percent range which shifts higher as policy tightens. But in recent months it has crept higher within that range, currently set at 1.50 percent to 1.75 percent, on some days hitting even 1.70 percent.

Reporting by Ann Saphir; Editing by Chizu Nomiyama

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