Former Dallas Fed president Kaplan’s solution for inflation not about the Federal Reserve

Comments from Kaplan ahead of today’s Federal Open Market Committee (FOMC) meeting. Kapaln argues that fiscal policy is what is preventing inflation from falling and the Federal Reserve for cutting rates:

• one
  of the reasons why
  the Fed is
  struggling to be
  able to cut
  rates and why
  service sector
  inflation and wages
  are so
  sticky, is excessive
  government spending
• the
  inflation rate on
  goods is today very,
  very low …
  the supply chain
  issues have
  gotten worked out
• the inflation issue
  today is
  almost exclusively
  in the not
  totally but almost
  exclusively
  in the service
  sector … we’ve got a very
  sticky labor
  force cost issue (ps. US employment cost Index for Q1 comes in at 1.2% versus 1.0% expected)

Kaplan’s recommendation not to the Fed, but government:

• slow down
  implementation of
  the inflation
  reduction act and
  infrastructure
  act projects, not
  cancel but
  slow, and let’s
  wrestle this
  inflation issue to
  the ground

Kaplan spoke with CNBC, interview is here:

***

The Federal Open Market Committee (FOMC)’s policy decision will be released on Wednesday May 1 at 2 pm US EDT (1800 GMT) with Fed Chair Jerome Powell following up with his press conference at 2:30 pm (1830 GMT).

Earlier previews:

• BoA on the FOMC meeting – more clarity on inflation is needed, in “want and see” mode

• FOMC meet this week: “the most interesting news about this meeting will come on 22 May”
• “Fed has simply run into a brick wall”
• expect a hawkish Fed and Powell
• Fed cuts are not imminent

This article was written by Eamonn Sheridan at www.forexlive.com.