Fed's Kaplan sees gradual rate hike appropriate

October 19, 2016 2:06 PM EDT

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By Lisa Maria Garza

FORT WORTH, Texas (Reuters) - U.S. inflation, which has under-run the Federal Reserve's 2-percent target for years, is "likely firming," Dallas Fed President Robert Kaplan said on Wednesday, adding that some removal of monetary accommodation will be appropriate.

Kaplan, speaking at the Fort Worth Chamber of Commerce's Mayor's International Luncheon, said he expects U.S. GDP growth to be about 1.75 percent this year, slower than what has been historically the norm but enough to push down unemployment and reduce slack in the labor market.

But because growth is so sluggish, and looks likely to remain so because of factors like an aging population that are beyond the Fed's control, any rate hikes must be made "gradually and cautiously," he said.

Most Fed officials expect to raise the Fed's target policy rate before the end of the year. Kaplan's comments add to suggestions from other policymakers that what will be the second rate hike since the financial crisis is unlikely to be followed closely by many more.

Kaplan said he expects the path of rate hikes over the next two or three years to be flatter than at any time in the Fed's history.

Kaplan participates in the Fed's regular policy discussions, but will not vote on policy until next year.

(Reporting by Lisa Maria Garza, writing by Ann Saphir; Editing by Chizu Nomiyama; Editing by Chizu Nomiyama)



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