Dallas Federal Reserve President Robert Kaplan has said he believes the central bank will have to raise interest rates next year.
Though he doesn’t see inflation as a looming problem, Kaplan expects economic recovery to progress enough to allow the Fed to take a less accommodating approach than it has since the start of the Covid-19 pandemic.
“There were some dots starting increases in 2022. And, you know, I’m one of those dots. Yes, absolutely,” said Kaplan, speaking CNBC. The ‘dots’ the central bank official mentions are a reference to the Fed’s dot plot system, used to map its outlook for the path of interest rates.
However, only three other members of the Federal Open Market Committee concurred with Kaplan’s position, and the majority view of no interest rate hikes until at least 2023 prevails.
With the Fed making strong progress on its employment and inflation goals, Kaplan spoke in favor of removing some support measures put in place as a result of the pandemic.
He added that he would be “an advocate of beginning the process of removing some extraordinary monetary measures, and doing it sooner rather than later. But I need to see outcomes, not just not just a strong forecast.”
Kaplan said he expects 6.5% growth this year, with an unemployment rate of 4.5%. He also warned of increased inflation this year as businesses adjust to the changes to their operations, but predicted that this would settle down next year.