2018.05.1601:29:00UTC+00 Fed’s Kaplan: Inflation Rising but not ‘Running Away’

Dallas Federal Reserve President Robert Kaplan said on Tuesday that U.S. inflation is climbing toward the Federal Reserve's two percent target will not climbing enough to indicate the economy is overheating.

Inflation is nearing the 2 percent but it is not 'running away from us', the Fed official said in his remarks at an event titled “Energy, Trade, and Energy Growth”.

In April, inflation figures indicated further increase in domestic wages and consumer prices despite falling below market estimates.

The Fed official, who is not a voting member of the Federal Open Market Committee this year, said that he expected the U.S. economy to rise to around 2.50 percent to 2.75 percent in 2018, supported by the biggest tax reform in three decades adopted in December.

Kaplan cautioned the boost from the tax overhaul would dissipate in 2019, slowing GDP expansion to 1.75 percent to 2 percent growth by 2020.

He said that with businesses growing and the consumer sector in “pretty good” condition, the Federal Reserve will likely remain on its path to lift the key overnight borrowing costs at a gradual clip.

Meanwhile, Kaplan said that he is closely tracking the shape of the U.S. yield curve and would be cautious of it were to invert, a market development that has often precedent U.S. recessions.