>>> WELCOME BACK.
BLAME THE FEDERAL RESERVE FOR
THE MARKET SELLING OFF.
THE PRESIDENT THINKS SO.
>> I THINK TECH STOCKS HAVE SOME
PROBLEMS BUT THAT WILL COME
BACK.
BUT NO, I THINK WE'RE GOING TO
DO VERY WELL.
I'D LIKE TO SEE THE FED WITH A
LOWER INTEREST RATE.
I THINK THE RATE'S TOO HIGH.
I THINK WE HAVE MUCH MORE OF A
FED PROBLEM THAN WE HAVE A
PROBLEM WITH ANYONE ELSE.
>> THE SELLOFF IN STOCKS HAS
BEEN LARGELY ABOUT WORRIES OVER
ECONOMIC GROWTH SLOWING DOWN.
I SAT DOWN WITH FEDERAL RESERVE
BANK OF DALLAS PRESIDENT, ROBERT
KAPLAN.
I ASKED HIM ABOUT THE RATE HIKE
TIMING, THE ECONOMIC CYCLE RIGHT
NOW, AND WHY HE'S WORRIED ABOUT
GROWTH COMING DOWN.
>> THE REASON I THINK GROWTH MAY
WELL SLOW, THE FISCAL STIMULUS
IS HELPING US THIS YEAR AND WE
HAVE BEEN EXPECTING THAT SOME OF
THAT EFFECT WILL FADE IN '19 AND
'20.
THAT'S TO BE EXPECTED.
AND UNDERNEATH THE ECONOMY, GDP
IS MADE UP OF GROWTH IN THE WORK
FORCE AND GROWTH IN PRODUCTIVITY
AND WORK FORCE GROWTH HAS BEEN
SOLID, BUT WE THINK IT'S GOING
TO START TO BE CHALLENGED,
BECAUSE OF AGING.
WE'RE PULLING MORE PEOPLE INTO
THE WORK FORCE, THAT'S A GOOD
THING, BUT WE ARE AGING AS A
SOCIETY.
WORK FORCE GROWTH AS A RESULT IS
SLOWING.
THIS IS WHY TRAINING, SKILLS
TRAINING, THINGS THAT GET PEOPLE
INTO THE WORK FORCE IS SO
IMPORTANT, SO THEN THE QUESTION
IS CAN PRODUCTIVITY GROW.
THAT'S GOING TO BE BASED HEAVILY
ON MORE BUSINESS INVESTMENT,
TECHNOLOGY, AND MORE ADAPTABLE
WORK FORCE, AND THAT'S THE THING
WE DON'T KNOW, BUT I WOULD SAY
WITH CORPORATE PROFIT GROWTH
SLOWING DOWN AND MAYBE
DECELERATING INTO '19, THAT
PROBABLY CREATES A HEAD WIND FOR
MORE CAPX AND MORE INVESTMENT.
>> WE HAVE ANOTHER INTEREST RATE
HIKE THAT WE'RE EXPECTING IN
JUST THE NEXT COUPLE OF WEEKS,
WHEN THE FED HOLDS ITS LAST
MEETING OF 2018, AND ROBERT,
GOING INTO THAT MEETING, YOU'VE
GOT THE "WALL STREET JOURNAL"
EDITORIAL BOARD SAYING HOLD UP,
FEDERAL RESERVE, THEY SHOULD
RETHINK, THEY SAY START WITH THE
FED, WHICH SHOULD RETHINK ITS
DECEMBER RATE INCREASE.
NO OTHER MAJOR CENTRAL BANK IS
LIKELY TO RAISE INTEREST RATES
SOON AND AMERICA IS NOT AN
ISLAND.
THERE'S A LOT GOING ON
INTERNATIONALLY THAT MAYBE WE
SHOULD NOT BE RAISING RATES FOUR
TIMES THIS YEAR.
YOUR REACTION?
>> MY REACTION IS WE'VE RAISED
RATES NOW EIGHT TIMES OVER THE
LAST TWO AND A HALF, THREE
YEARS.
WE'RE NOW AT 2% TO 2.25%.
I THINK WE'RE GETTING CLOSE OR
APPROACHING NEUTRAL, WHERE WE
ARE NEITHER ACCOMMODATIVE OR
RESTRICTIVE.
I THINK AT THIS STAGE, MY OWN
APPROACH WILL BE TO AVOID BEING
RIGID OR PREDETERMINED IN TERMS
OF OUR NEXT STEPS.
WE ARE GOING TO USE THE LINGO
DATA-DEPENDENT.
THAT MEANS I WILL BE VERY
SENSITIVE TO TALKING TO
CONTACTS, LOOKING AT DATA,
UNDERSTANDING WHAT'S GOING ON
WITH BUSINESSES, LOOKING
GLOBALLY, AND I THINK WE WOULD
BE WISE TO BE VERY PATIENT AND
GRADUAL FROM HERE, BECAUSE I
THINK WE ARE APPROACHING A
NEUTRAL STANCE AND WE'VE GOT
SOME OF THESE HEAD WINDS THAT
YOU AND I JUST TALKED ABOUT.
>> SO YOU SAID THAT OFTENTIMES
WHEN RATES MOVE, IT'S A LAG IN
TERMS OF WHEN IT ACTUALLY IS
FELT, RIGHT, SO WE HAVE SEEN
THREE HIKES THIS YEAR.
WHAT'S YOUR TIMING IN TERMS OF
HOW THIS AFFECTS AND TAKES
IMPACT?
>> WELL, YOU NEVER KNOW EXACTLY
WHAT THE LAG IS, BUT MY OWN
WORKING THOUGHT IN MY MIND IS
SIX TO 12 MONTHS.
SO THE THING I'VE BEEN SAYING
AND TALKING TO MY TEAM ABOUT AND
AROUND THE FOMC TABLE IS I'M
VERY CONSCIOUS OF THE FACT IT'S
POSSIBLE THAT THE U.S. ECONOMY
COULD LOOK VERY DIFFERENT IN THE
FIRST QUARTER, FIRST HALF OF
2019 THAN IT DOES TODAY, BECAUSE
YOU'VE GOT THESE CROSS-CURRENTS
WITH THE FISCAL STIMULUS, WHAT
MONETARY POLICY TAKING HOLD,
OTHER TRENDS GOING ON, TARIFFS,
INPUT COSTS, GLOBAL GROWTH
DECELERATING.
SO I THINK THE WAY TO DEAL WITH
ALL THOSE UNCERTAINTIES IN MY
POSITION IS TO BE WILLING TO BE
VERY FOCUSED ON DATA, NOT BE
RIGID, NOT BE PREDETERMINED, AND
TO BE PATIENT.
>> SPEAKING OF GLOBAL GROWTH,
CHINA SAW GROWTH AT 6.5%.
SOUNDS GOOD BUT IT'S LOWER THAN
A LOT OF PEOPLE THOUGHT.
JAPAN CONTRACTED, .3% IN THE
LAST QUARTER.
EUROPE IS REALLY MIXED.
GERMANY'S A LOT WORSE OFF THAN
PEOPLE THOUGHT.
THEN OF COURSE, YOU HAVE BRITAIN
EXITING THE EUROPEAN UNION.
HOW IMPORTANT ARE THESE GLOBAL
ISSUES IN TERMS OF ITS IMPACT ON
AMERICA?
>> I THINK GLOBAL GROWTH
DECELERATING EVENTUALLY IN MY
JUDGMENT WILL HAVE SOME
SPILLOVER EFFECTS TO THE UNITED
STATES.
THE OTHER REASON WE SEE IT
SIGNIFICANTLY, ALMOST 45% OF S&P
500 COMPANIES, THEIR REVENUES
ARE OUTSIDE THE UNITED STATES.
SO WHILE YOU MAY NOT SEE IT AS