Dallas Fed President Robert Kaplan said in an essay that 2020 GDP is expected to show a contraction of approximately -3.0%. The economy would then growth by roughly 3.5% in 2021. But he emphasized the need of “additional” fiscal measures. ” Lack of additional fiscal relief would create a key downside risk to my economic forecast for 2020 and 2021.”

On recent FOMC statement, Kaplan explained his dissent again: “There is an important difference between remaining “accommodative” and keeping rates at zero. I believe, after we have fully weathered this crisis, we should be willing to be more accommodative than in the past in order to create a stronger and more inclusive labor market and make progress on achieving our 2 percent average inflation target. However, I am cognizant that as the economy approaches full employment and we are on track to reach our price stability objectives, the equilibrium nominal rate of interest (the federal funds rate at which monetary policy is neither restrictive nor accommodative—often referred to as R*) is likely to increase. This means that as we approach achievement of our dual-mandate objectives, the stance of monetary policy will actually become more accommodative if the fed funds rate were to remain at zero. I can understand why future Committees will want to remain accommodative at that point in order to ensure we achieve our goals, but will they want to be effectively increasing the level of accommodation by keeping the federal funds rate at zero? I would like future Committees to have the flexibility to make this judgment.”

Full essay here.

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