US central bank should be patient in raising interest rates

The US central bank should be “patient” when it comes to interest rate hikes, the president of the Federal Reserve bank of Dallas said.

“I believe that recent developments call for patience and further diligence in assessing the impacts of slowing global growth and tighter financial conditions on the U.S. economy,” Dallas Fed chief Robert Kaplan, according to prepared remarks for a speech to be delivered on Thursday.

Unlike some market commentators, on the other hand, Kaplan pointed out how a stronger US dollar should benefit consumers in the States.

Kaplan also emphasised that central banks could not be called on to right the economy by themselves.

Monetary policy was not designed to act alone or as a substitute for fiscal policy or structural reforms, he said.

“There are limits to the potential impacts of monetary policy,” Kaplan added.

“The broad domestic secular challenges of an aging population, access to education and health care, underinvestment in infrastructure, high levels of debt to GDP, and projected stresses on our ability to meet future obligations for retirement and medical benefits are all examples of issues that may affect the long-run path of sustainable economic growth.

“Monetary policy has a critical role to play in promoting good economic performance and price stability, it has limitations in being able to address these longer-run issues.”