Dallas Fed President Kaplan on Bloomberg TV- Sees a slow down in 2019 and 2020; To get fourth rate hike would like to see signs of sustainable growth in the economy
- Would tolerate moves above 2% in inflation but would not want to see a sustained move.
- Debt is a stimulus but will be a headwind in coming years.
- Trade is an opportunity for the U.S.; Would be concerned if NAFTA is not able to be completed.
- Biggest threat to the economy is the slowing workforce growth; skill levels are lagging the rest of the World; Very highly leveraged and leveraged up late in the economic cycle which he is worried could be a headwind.
- Corporate Debt to GDP is higher but financials are deleveraged; Says economy is strong enough to deal; 'something to watch but does not see a red flag yet'.
- Fragile equilibrium for supply/demand in oil; thinks for next 3-5 years will see volatility in oil; Shale will be at the forefront; over longer period fears that their will be a supply shortage.
- Yield Curve- Does not see policy steps to address longer term issues; Would not make a policy move to invert; could inadvertently invert; watching shape of the curve every day; curve tells him that future policies are lacking confidence.
- Raising Fed Fund rates and getting towards neutral which sees at 2.50-2.75%; 3-4 moves will be at neutral.
- Still thinks will be moving towards a neutral policy in 2019