Fed Has Limited Room to Manoeuvre on Interest Rate Hikes – Kaplan

The normalisation of monetary policy is hampered by a low neutral rate, Dallas Federal Reserve Bank President Robert Kaplan said on Thursday.

“There is room for the Fed to manoeuvre but not as much as people might think because the neutral rate of interest is somewhat lower than people think,” Kaplan told a meeting of financial service professionals in Dallas, Texas.

“It’s a challenging time,” he added.

The neutral rate is the level of borrowing costs associated with stable inflation and full employment. The U.S. central bank has struggled to raise interest rates again following the first increase in a decade last December.

Reuters

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Craig Erlam
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.