Stockmarket valuations not at worrisome levels, Fed's Kaplan says

Stockmarket valuations were not at worrisome levels, the head of the Federal Reserve bank of Dallas said.

In remarks to CNBC, Robert Kaplan said that share prices in the US were not at levels which might threaten financial stability, while pointing to improved corporate earnings as proof of that.

However, "some correction" might be healthy from the point of view of helping the expansion last longer, he explained.

During the same interview, Kaplan said he saw two more 25 basis point interest rate hikes in 2017, adding that he also expected the US central bank to begin winding down its balance sheet this year.

Kaplan said the size of the Fed's balance sheet should be reduced from $4.5trn to something "substantially less".

"I don't want to put a specific number on it. If somebody says in the 2s, that sounds about right to me".

"I think that removal of accommodation should be done gradually and patiently", he added.

Kaplan also expected economic growth to continue at about 2%, instead of the 3% targetted by the White House, CNBC said.

Commenting on some of the Trump administration's policy proposals, Kaplan said he backed initiatives such as tax reform, lowering business regulation and spending on infrastructure.

Immigration restrictions on the other hand might be negative, while deficit-financed tax cuts would only provide a short-term boost even as the economy was left saddled with higher debt in the long-term.