Robert Kaplan, the Dallas Federal Reserve Bank's president, favors another interest rate hike only if there are more signs of upward inflation, while acknowledging that leaving borrowing costs at low levels may cap the extent and pace of future hikes, Reuters reported.
"What I don't want to see us do is raise rates so fast that we get an inverted yield curve because history has shown an inverted yield curve has tended to be a precursor to a recession," Kaplan said at the Stanford Institute for Economic Policy Research on Oct. 10.
The targeted short-term interest rate has increased, but yields on the 10-year Treasuries have slipped in a reversal of what usually happens that he described as "a little ominous," according to the report.
Kaplan said technology-enabled disruption and globalization were limiting the pricing power of businesses and keeping inflation muted, despite near-full employment, according to a Twitter post by the Dallas Fed. Kaplan recently said at a luncheon in El Paso, Texas, that the Fed can be patient on raising rates and that it was open-minded about a rate hike in December.
The Fed is widely expected to raise rates in December, having done so twice so far in 2017.