Economic growth in the United States may peak this year and slow somewhat next year and in 2020, according to Dallas Fed President Robert S. Kaplan.
“2018 will be a strong year in the United States,” he said at a business conference in Frankfurt on Thursday. “We think we’re at or near full employment in the US. We’d expect headline unemployment to dip below 4 percent during this year,” Kaplan added.
He said that the US Federal Reserve is likely to continue removing policy accommodation gradually, and could hike rates three times this year. The Fed increased rates three times in 2017.
Kaplan said that recent market volatility in itself was not enough to change his base scenario, although he was “highly vigilant” about the turbulence and would study whether it has any effect on the real economy.
“At this point, I don’t see this market adjustment spilling over into financial conditions – but I’ll be watching carefully,” he said, adding “My base case is the same.”
Kaplan, who’s a non-voting member of the Fed’s policy committee, explained that any removal of stimulus would be gradual and careful, without pre-commitment to any particular rate path.
US stocks posted their worst single-day drops this week, with the Dow Jones industrial average marking the biggest daily point decline ever seen. The drop was triggered by worries that rising wage inflation could force the Fed to tighten policy more quickly. Markets have calmed down and recovered some ground in the last two days.
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