Odd Lots Dallas Fed President Rob Kaplan on the Economy and Monetary Policy Right Now
Aug 9, 2021
Rob Kaplan, President of the Dallas Federal Reserve since 2015, offers a deep dive into the current economic landscape as we recover from the pandemic. He discusses rapid GDP growth and the unprecedented levels of inflation, along with the intricacies of fiscal and monetary policy. Kaplan highlights the challenges posed by supply chain issues and labor market imbalances. He advocates for long-term investments in infrastructure and education while stressing the need for adaptable strategies to manage inflation and support economic stability.
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Macroeconomic Outlook
- The US economy is predicted to grow by 6.5% in 2021, moderating to 2.5-3% in 2022.
- Unemployment is expected to reach 4.5% by year-end, with PCE inflation around 3.8%.
Managing Economic Stimulus
- Reduce economic stimulus gradually to address supply-demand imbalances.
- Asset purchases are better for stimulating demand than resolving these imbalances.
Adjusting Asset Purchases
- Adjust asset purchases sooner but more gradually than proposed by others.
- Aim for a baseline reduction of $10 billion in treasuries and $5 billion in mortgage-backed securities monthly.