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Dallas Federal Reserve Chairman Robert Kaplan said he would not be in favor of a change in the central bank’s bond buying program, even though he sees tough times for the US economy .
Speaking to CNBC on Wednesday, Kaplan said financial conditions are such that the Fed probably doesn’t need to do more than its current rate of at least $ 120 billion per month in Treasuries and backed securities. to mortgages.
“I wouldn’t want to do that at this point,” he said in a “Closing Bell” interview. “I will approach the December meeting with an open mind. But I think we have very accommodating financial conditions, we have historically low rates over the long term, so I don’t know whether to increase the size or extend the maturities. of our bond purchases would help remedy this situation that concerns me over the next three or six months. “
During this period, Kaplan expects a “tough” economy where growth could slow significantly or come to a halt mainly due to the surge in coronavirus cases.
The United States recorded 176,785 new cases on Tuesday, although last week showed a slight deceleration in pace from the rapid growth in October and November, according to the Covid Tracking Project. Hospitalization and death rates continue to rise, and economic restrictions have returned in some areas.
Investors have been asking whether the Fed will step up bond purchases that have pushed its assets to nearly $ 7.3 trillion, or whether it will shift the mix by buying longer-term securities. The November meeting report indicated that members were in favor of changing the program “fairly quickly”.
However, Kaplan said Congress would likely be in a better position to push the economy through what could be a difficult few days before the widespread release of vaccines that are expected to start going online in the coming weeks.
He added that the continued rise in the stock market was a result of investors looking through the tough times ahead and towards what Kaplan predicts as “very strong” growth in 2021.
“I think it’s more likely to react to the idea that we’re going to have strong growth next year even if we have a next quarter or two,” he said. “He can also react to the prospect of a fiscal stimulus that would help us get through the next three to six months.”
Kaplan is currently a voting member of the Federal Free Trade Committee, although he will lose that status in January.
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