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Dallas Fed Pres Robert Kaplan, a strong hawk, in his third interview this week, has told CNBC that he doesn’t favour increasing pace of bond purchases and that fiscal policy ‘more suited to help’ than monetary policy.

He said 2021 Gross Domestic Product growth is seen in excess of 3.5%, but the next 3-6 months will be challenging for the economy.

He sees growth moderating and that it could stall out before recovering.

Earlier in the day, there was news in the Wall Street Journal that reiterated comments from Monday that he would
favour the Fed providing clarification “in the not too distant future” on its asset purchase policy.

This would include guidance on conditions under which they begin to taper the program.

Kaplan also told the WSJ he didn’t see the need to make a change to the asset purchase program at the moment; if the Fed were to make changes, his preference would be to adjust the maturity of purchases, not the size.

Market implications

The market listens to Kaplan as he is renowned for being very hawkish.

He dissented at the September FOMC over the change to language on forward guidance.

Nevertheless, at this juncture, the market will not buy into the hawkish tones and are fixated on stimulus. 

The US dollar is being hit from both sides, in anticipation of an easier Fed and sold off by the latest fiscal stimulus progress in talks. 

DXY under pressure