(Reuters) -Dallas Federal Reserve President Robert Kaplan said on Tuesday that he is among the policymakers expecting the central bank could start raising rates as soon as next year.
As more people are vaccinated against the coronavirus and the economy continues to improve with the help of generous fiscal stimulus, including a $1.9 trillion aid package signed into law this month, Kaplan said he would be an early advocate for scaling back monetary support.
“I have a forecast for removing accommodation that’s more aggressive than the median” Fed official forecast, Kaplan said during an interview with CNBC.
At last week’s policy-setting meeting, Fed officials agreed to keep interest rates steady near zero and to continue purchasing $120 billion a month in bonds until there is “substantial further progress” toward the central bank’s goals for maximum employment and inflation.
Kaplan said that he now expects the economy to grow by 6.5% in 2021 and for inflation to rise by as much as 2.5% this year before settling down in 2022.
In a section of their economic projections known as the “dot plot,” four Fed officials said they expect the central bank may need to raise rates next year and seven said they a rate increase by the end of 2023.
Kaplan, who gains a vote on the Fed’s policy setting committee in 2023, said he is one of the four “dots” expecting rates to start rising in 2022. However, he said he would need to see those improvements materialize in the economy before he supports scaling back Fed support. The majority of the 18 members forecast that rates would still be near zero by the end of 2023.
“We’re just not there yet,” said Kaplan, adding that the Fed would need to first reduce its asset purchases before raising interest rates. “It’s an outcome-based test.”
Reporting by Jonnelle Marte; Editing by Andrew Heavens and Andrea Ricci
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