Influential Fed centrists Williams (soon to be NY Fed President) and Dallas President Kaplan last week reiterated an upbeat message for 2018 but sounded curiously cautious thereafter.
Key Quotes:
“Kaplan cautioned that the tax boost would fade in 2019, slowing growth to 1.75%-2.0% in 2020, putting him at the lower end of the central tendency.”
“Williams did not speak to 2019 specifically but did note that the “tax cuts are front-loaded” and that optimism about r-star is misplaced, noting, “I’m conscious that the fundamental drivers that govern r-star are lower than we’ve seen in the past” (i.e. demographics, productivity growth and the demand for safe assets).”
“Against that Fed Governor Quarles has noted that tax cuts could drive supply side improvements and raise r-star.”
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