US central bank may need to be more patient, Fed´s Kaplan says

The multiple headwinds the US economy was encountering argued for patience when deciding on interest rates, a top US central bank official told the Financial Times on Wednesday.

In an interview with the FT, the president of the Dallas Fed, Robert Kaplan, said: "in order to reach our inflation objective we may need to be more patient than we previously might have thought."

"If that means we take an extended period of time where we stop and don´t move, that may also be necessary. I am not prejudging that."

Speaking from his office in Dallas, Kaplan referenced "somewhat less accomodative" financial conditions since the beginning of January, a tendency for the US dollar to strengthen, longer-term factors such as an ageing population and disruptive technologies and slower Chinese growth as factors to watch carefully.

However, he added that: "I think for the markets to focus more on fundamentals and not be priced because they are reliant on Fed action, some of that is healthy."

Describing the economic recovery in the US as 'fledgling', the policymaker said: "we have to be sensitive to the fact that the dollar, all things being equal, is going to tend to be stronger. We are going to have to be sensitive to the impact we have on that."

As regards China, the central banker did not subscribe to forecasts for a 'meltdown'.

He was also optimistic that lower oil prices would lead to stronger growth down the road, while the bout of insolvencies and firings in the US oil sector "should last for the first few quarters" of 2016.

Kaplan was not a member of the Federal Open Market Committee in 2016 but took part, like all regional Fed presidents, in policy deliberations.

His remarks followed more 'hawkish' ones from his opposite number at the Federal Reserve bank of Kansas City, Esther George, on the previous day.

Also speaking on 23 February - just three weeks ahead of the next FOMC meeting - Fed vice chairman Stanley Fischer said "it is still early to judge the ramifications of the increased market volatility of the first seven weeks of 2016."