Fed´s Kaplan sees case for rate hike in near future, Brexit will be a factor

A top US central bank official said he would support another interest rate hike "in the near future", adding that the risk of a possible Brexit would factor into rate-setters´ deliberations.

"If the data conditions continue to unfold as I expect I will be advocating that we take further (normalization) in the near future.

"It may not necessarily be June, but the near future," Dallas Fed president Robert Kaplan said after roundtable discussion hosted by the Greater Houston Partnership, Market News International reported.

"We're just going to have to make a judgment as we get closer," he said, adding that, "We have a meeting in July also."

Kaplan did not hold a vote on the Federal Open Market Committee in 2016 but was set to wield one in 2017.

The central banker also indicated a preference for two interest rate hikes over the remainder of 2016, regardless of whether the central bank moved in June or July, MNI said.

To take note of, the Dallas Fed president said he had not yet revised the interest rate forecasts which he submitted for the central bank´s March Summary of Economic Projections, what market participants refer to as the Fed´s 'dot-plot graphs'.

From a fundamental perspective, Kaplan reportedly emphasised his expectation that household consumption would strengthen now that de-leveraging had taken place.

The economy was also nearing full-employment and, pointing to a recent rise in the Dallas Fed´s trimmed mean measure of 'core' prices to 1.9%, that inflation was moving back towards policy-makers´ target of 2.0%.

On the subject of Brexit, the central banker said it would be a factor at the 15 June FOMC.

Kaplan expressly noted the risk of a sell-off in sterling in reaction to a 'flight to quality' by investors.

"For me the reason I want to at least make an assessment of it is that there is longer term potential effects of Brexit, but also a short-term potential destabilization," he explained.

"Sterling could sell off" and there could be "a flight to quality."