Central bankers need to show patience on future interest rate hikes as the U.S. economy slows, Dallas Federal Reserve President Robert Kaplan told CNBC on Thursday.
“We’ve raised rates eight times over the last 2 and a half, or 3 years,” said Kaplan, who is not a voting member on the central bank’s policymaking committee this year or next year.
Kaplan appeared on “Squawk Box” as Dow futures were pointing to about a 400 point drop at Thursday’s open. (The NYSE and Nasdaq were closed Wednesday for George H.W. Bush’s funeral.) The Dow Jones Industrial Average tanked nearly 800 points, or 3 percent, on Tuesday. It was the biggest decline since the October rout. The Dow and S&P 500 were able to stay out of a correction, but Tuesday’s decline sent the Nasdaq back into correction territory.
The number of interest rate hikes next year has been the subject of debate on Wall Street as concerns about rates and an economic slowdown continue to slam the stock market.
The Fed, at its Dec. 18-19 meeting, is expected to raise rates for the fourth time this year. After its September rate hike, the Fed projected three rate increases into 2019. The current target range for the central bank’s benchmark federal funds rate, which banks charge each other for overnight lending, stands at 2 percent to 2.25 percent.
Fed Chairman Jerome Powell, under repeated criticism from President Donald Trump for increasing rates, last week appeared to walk back his comments from Oct. 3 that rates were a “long way” from so-called neutral, which for October led to the worst monthly stock market losses in about seven years.
In last week’s speech at the Economic Club of New York, Powell said that rates are “just below” neutral, perhaps indicating that concerns about much higher rates may no longer be warranted. The market then rallied three out of the next four sessions before Tuesday’s plunge.
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