Fed's Kaplan says strong consumer will help the U.S. economy avoid recession in 2020

FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan speaks at the Commonwealth Club in San Francisco, U.S., October 11, 2019. REUTERS/Ann Saphir

(Reuters) - Dallas Federal Reserve Bank President Robert Kaplan said he does not expect the U.S. economy to enter a recession next year, and he was optimistic that the strong consumer can help the U.S. economy overcome potential headwinds.

A tight labor market and robust consumer spending is countering the downside risks of a slowdown in business investment, weak manufacturing and a global slowdown, Kaplan said, speaking to an audience of mostly students at Tarleton State University in Stephenville, Texas. The event was hosted by the Dallas Fed.

“The consumer is in pretty good shape,” he said. “That’s a great underpinning to the economy and even though growth is sluggish I don’t expect a recession in 2020.”

Kaplan said he expects the economy to grow by about 2% this year.

Fed officials lowered interest rates in October for the third time this year, bringing the target rate to a range of 1.5% to 1.75%.

The Dallas Fed president said two weeks ago that he only supported the rate cut with the condition that the Fed would signal it was done reducing borrowing rates for now, barring any material change to the economic outlook. Kaplan does not vote on setting monetary policy currently but he will become a voting member next year.

Reporting by Jonnelle Marte; editing by Diane Craft