Dallas Federal Reserve President Robert Kaplan said on Friday that he could back a rise in U.S. interest rates as soon as June or July, if U.S. economic data firms up as he expects.
Kaplan, who does not currently vote this year on the Federal Open Market Committee, said interest rates should rise gradually but that financial markets had underestimated the Fed’s readiness to follow December’s rate rise with another move.
“We’ll see how the second quarter unfolds but I think the market may well be underestimating how soon we might move next,” Kaplan said at an event in London hosted by think-tank OMFIF.
“If the second-quarter data is firming you will see me advocating in the not too distant future that we try to take the next step. We will see what meeting, whether that means June or July or what else. I’d like to see it happen,” he told reporters after.
The Fed kept rates on hold at 0.25-0.5 percent this week and signaled it was in no rush to raise them again soon, citing slowing economic activity despite an improved labor market.
The message pushed the dollar sharply lower and helped drive oil prices to their highest so far this year.
For economists it also added to a feeling that has been growing since the start of the year that U.S. rates may not be set to diverge from those in Europe and Japan as much as many had predicted.
Kaplan’s remarks were the first from a U.S. policymaker after this week’s Fed rate decision, and appeared calculated to drive home a more hawkish message on rates.
If GDP growth rebounds this quarter, as expected, “I personally will be moving toward advocating some removal of accommodation sooner rather than later,” Kaplan said in a Bloomberg TV interview after his speech.
“I will also advocate that we take these steps in a gradual and patient manner,” he said, expressing a cautious view on normalizing rates held widely at the Fed.