As mentioned in our embarrassing post here recently The Dallas Federal Reserve had a Town Hall meeting with special guest speaker Dallas federal president reserve Robert Kaplan.
One of our favorite things to do is listen to people like Robert Kaplan in less public venues in order to try and get their candid or less guarded opinions.
This will make the 10th article talking about Kaplan and as such you may notice that we are pretty big fans.
Kaplan Town Hall Candid Comments
What was interesting about this town Hall meeting was that Kaplan for the first time since his tenure at the FOMC dissented about the federal reserves decision due the fact the the FOMC made a three pronged approach for their interest rate movement decisions.
What do we mean? In the released report from the FOMC chaired by Jerome Powell but with Robert Kaplan a voting member at the meeting they released the following unique statement
1. We intend on having interest rates lower for longer – In Kaplan’s opinion and ours, that was enough
2. We will keep interest rates lower even if inflation ticks up – this is the comment that Kaplan had an issue with and we do as well as we have written multiple times ( here here here and here ) that inflation may actually raise its head , Kaplan agreed!
3. Until a very lower rate of unemployment. is established we will also wait to raise rates
That’s just too many strings to attach to the FOMC and to especially hand over to future decisions makers!Kaplan, during the Town Hall Event
Maybe the reason we like Kaplan so much is he seems to think very much like we do and have similar concerns. By attaching these three points together future Federal Reserve board members are being bound by a multi point limitation that could cause problems. What if one of these points gets dramatically above target but another is not thereby limiting the increase in interest rates?
Kaplan … like us, believes that there is a time in the not too distant future where interest rates will need to be raised and normalized not only for inflation limitations but also for industries that rely on higher interest rates.
Kaplan also mentioned that low interest rates for too long of a period of time may cause people to take greater risks than they otherwise would.
Lastly, Kaplan once again seeing eye to eye with our beliefs, said that low interest rates for too long of a period of time becomes not only helpful but a stimulus that is unneeded once the economy gets rolling.
Time will tell but once again we like Kaplan’s thoughts on higher interest rates potentially sooner rather than later but likely a year or so out!
Updated Thoughts From More Recent FOMC Statement
So time flew past us on getting this post to you, but in true making Lemonade out of Lemons fashion, something neat occurred….
Our Procrastination lead to a Lucky Update!
Last week, the FOMC released their latest statement here and guess what?
No strings like the prior meeting, just simple slow economy stuff and, Kaplan voted FOR the opinion… no dissenting this time.
Maybe the FOMC members have already backed down from their prior “Strings Attached” discussion!
Have a Great “Kaplan FOMC” Update!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth