Former Dallas Fed chief says markets overprice rate hikes, backs October pause

Former Dallas Fed President Robert Kaplan said financial markets are pricing in overly aggressive expectations for U.S. Federal Reserve rate hikes. Kaplan said a September rate increase was appropriate and another hike in December could be a reasonable option, but added that holding rates steady in October would be preferable. He said the Fed’s dot plot points to one additional hike this year, while markets are pricing in at least three more hikes through June next year. Kaplan added that inflation remains a concern, but interest-rate-sensitive sectors such as autos, housing, and industries serving middle- and lower-income households are not overheated.