The Fed: Fed’s Kaplan says central bank must take wait-and-see approach to Trump policies

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Dallas Fed President Robert Kaplan

The Federal Reserve should take a wait-and-see stance toward the economic ideas of President-elect Donald Trump because some of the policies under discussion in the Trump camp could boost growth, while other ideas may slow the economy, said Dallas Fed President Robert Kaplan.

“I just want to wait and see what’s actually enacted and react to that. I don’t want to prejudge it. I think that is a better way to approach this,” Kaplan said Wednesday.

Among several policies being floated, many as campaign rhetoric, Trump’s pick for Treasury Secretary, Steven Mnuchin, said Wednesday that tax reform was the “No. 1 priority.”

Read: Mnuchin says tax cuts are path to ‘huge’ economic growth

Kaplan, meanwhile, sounded content with market consensus that the U.S. central bank will raise interest rates at its policy meeting next month. Odds of a rate hike have been hovering close to 90%, according to the CME Group.

“I’ve been saying for two or three months that I thought we’re at the point where we ought to remove some amount of accommodation,” Kaplan said.

The Dallas Fed president, who will be a voting member of the Fed policy committee in 2017, said there would likely be more rate hikes over the next 12 months.

In the past, Kaplan has said the path of future rate hikes was likely to be “somewhat shallower” than in prior cycles.

That assumption may have to be revisited depending on the policies enacted by Trump and the Republican Congress, he said.

“I don’t want to predict where the path of the fed funds rate will be. All I can tell you is we make policy on employment and inflation. If we see higher rates of GDP growth, you’ll see us respond accordingly,” Kaplan said.

“I don’t want to prejudge it, but we’re going to have to adapt to it,” he said.

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MarketWatch.com – Financial Services Industry News

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