Although he feels no rush, Federal Reserve Bank of Dallas President Robert Kaplan expects a total of three rate hikes this year and the start of reducing the Fed's balance sheet, according to a published report.
"I think we are moving toward a period where we should begin allowing the balance sheet to gradually and patiently run off," Kaplan told Reuters late Tuesday. "But I think we have work to do, probably, to get to that point."
The "work" to which he referred to raising interest rates. After last week's rate hike, Kaplan said, "I think that we've got the benefit of a little time here to see how the economy unfolds. I plan to take advantage of that to assess how the economy is unfolding and be prepared to make a judgment as we head toward the next meetings."
Two more rate increases this year would be "reasonable" if labor market slack keeps retreating and inflation continues moving toward 2%.
"We are still accommodative and I think it's very appropriate for us to be accommodative."
Trump administration policies will not impact his opinions until he's certain they will be approved by Congress.
The discussion of reducing the Fed's balance sheet should continue until rates go up, to a point he did not specify, and then the plan should be disseminated and take effect. His caveats included the balance sheet should be shrunk "gradually" so as not to "unduly affect" financial markets.
