Fed will be patient on U.S. policy given global risks: Kaplan

Fri Jan 29, 2016 5:40pm EST
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By Jason Lange and Jonathan Spicer

NEW YORK (Reuters) - The Federal Reserve will be patient as it decides how trouble overseas could hit the U.S. economy, a Fed policymaker said in an interview, suggesting the central bank will be slower to raise interest rates this year.

Dallas Fed President Robert Kaplan said on Friday it was "significant" that the Fed decided this week to no longer describe the risks to the U.S. economy as being "balanced," a term that meant officials were comfortable with their view of the outlook.

"It should be saying to people (that) we are going to take some time here to understand what is going on," Kaplan told Reuters in the first public comments by a top policymaker since the central bank's decision on Wednesday to hold rates steady.

The Fed raised rates for the first time in a decade in December, at which time policymakers signaled four further hikes would come in 2016. But since then economic weakness in China, Europe and Japan have prompted deep skepticism among investors, who now see only one hike this year.

Kaplan's comments seem to support that cautious view.

Global equities and oil prices plunged through most of January and Kaplan said he expected overseas challenges to affect the U.S. economy. He characterized as "clumsy" China's policy moves over the last six weeks to counter turmoil in Chinese financial markets.

"When you put all that together I think there is good reason to be patient (and) take more time to assess the impact on the U.S. economy," said Kaplan, who does not have a formal vote on Fed policy this year but who takes part in all deliberations.

Kaplan declined to say how quickly he expects the Fed to lift interest rates this year.   Continued...

Snow rests on the eagle statue atop the U.S. Federal Reserve in Washington January 26, 2016.  REUTERS/Jonathan Ernst