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Fed Kaplan not prepared for interest rates to go above neutral

Dallas Fed President Robert Kaplan said he’s “not prepared” for interest rates to “go above neutral”. And, he estimated that netural rate is between 2.50% and 2.75%. And that is, after four 25bps hike from the current 1.50-1.75%, fed fund rate will hit the neutral level.

For inflation he said “I want to run around 2, and if we got a little bit above it and I thought it would be short term and not long term, I could tolerate it.” On the other hand, “if I thought it would persist I think it would affect my policy views.”

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