Fed's Kaplan: Once US gets to the point of lower unemployment, not sure rates stay at zero
Kaplan explains his dissent
- Costs of new low rate vow not worth the benefits
- Says his forecast of strong growth for this year assumes some further fiscal support
- Market cap to GDP is at historic highs and normally some kind of correction can be helpful
- Fed still has things it could do with asset purchases and for small businesses
- Fed is looking at ways to make the main street lending program more attractive
He has a good point on the cost/benefit. The idea is that the Fed wants to push inflation up to 2%. They got very close to doing that before the pandemic with rates at 1.50%. Do they really need money to be 150 bps cheaper to accomplish the goal? If so, aren't they risking something far worse?