Fed’s Kaplan says fiscal stimulus waning, rate hikes to bite

February 7, 2019

DALLAS (Reuters) – Fiscal stimulus from tax cuts and a government spending bill are beginning to wane, and the lagged effect of a string of interest rate hikes has yet to fully impact the U.S. economy, Dallas Fed President Robert Kaplan said on Thursday, two reasons why he says he is advocating a stop to rate hikes for now.

Slowing global growth that could spill over to the U.S. economy, tighter financial conditions than six months ago, and the probability that last year’s tax cuts will not boost productivity as hoped, all contribute to his view that the U.S. economy will grow just 2 percent this year, he said.

“We would be well served and the country would be well served if we paused and were patient for some number of months and sort of get out of the way,” Kaplan said at a conference at the bank’s headquarters in Dallas.

(Reporting by Ann Saphir; Editing by Chizu Nomiyama)

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