May 7, 2019 / 12:15 PM / 12 days ago

Fed's Kaplan optimistic U.S., China will find ways to tackle trade issues

BEIJING (Reuters) - Dallas Federal Reserve Bank President Robert Kaplan said on Tuesday he was optimistic the United States and China would find ways to deal with their trade issues.

FILE PHOTO: Dallas Federal Reserve Bank President Robert Kaplan gestures during a news conference after of the True Economic Talks event in Mexico City, Mexico, July 14, 2017. REUTERS/Edgard Garrido

In a sharp deterioration in negotiations between the world’s two largest economies, top U.S. trade officials said on Monday China had backtracked on commitments it made during trade talks.

The concerns prompted U.S. President Donald Trump to say he would raise U.S. tariffs on $200 billion (152.8 billion pounds) of Chinese goods.

The sharp rhetoric from Trump followed upbeat U.S. economic data in recent weeks, which some say have given Washington leverage over Beijing during their trade talks.

Kaplan, who was attending a question-and-answer session at a Beijing university, said the U.S. economy should remain healthy, and a downturn or a recession was not to be expected.

U.S. gross domestic product grew 3.2 percent in the first quarter, according to an initial government reading last month, beating estimates for a 2.0 percent rise. The economy expanded 2.9 percent in 2018.

Kaplan, a supporter of the U.S. central bank’s decision to leave interest rates on hold amid muted inflation, told Reuters that U.S. rates should not move up or down for the time being.

“If ...we grow 2.25 percent (this year), we continue to see strengthening in the labour market, we continue to see some firming in inflation, moving towards our 2 percent objective, that will reinforce to me that our rate setting is in the right neighbourhood,” Kaplan told Reuters on the sidelines of the Tsinghua event.

Kaplan does not have a vote this year on monetary policy.

Despite Trump’s call for lower rates to boost GDP, the Fed kept its benchmark rate unchanged between 2.25 percent and 2.5 percent in its most recent meeting.

In January, the Fed put three years of rate hikes on hold, citing weakening global growth and an expectation for slower U.S. growth ahead.

Reporting by Kevin Yao; Writing by Ryan Woo; Editing by Clarence Fernandez and Kirsten Donovan

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