Federal Reserve's Kaplan calls for pause in US rate hikes

A top US central bank official called on Thursday for rate-setters to pause in their interest rate hiking campaign until the uncertainties looming over financial markets were resolved.

In remarks to Bloomberg News, the head of the Federal Reserve bank of Dallas, Robert Kaplan, said the monetary authority should not tighten policy in the "first couple of quarters [of 2019]."

"There's three big issues that I see reflected in the markets and which are consistent with what I'm seeing in the economy and in discussion with contacts, global growth decelerating, interest rate and economically-sensitive industries are showing weakness, financial conditions have tightened, I mean credit spreads have widened [...]

"It's going to take some time to see the breadth and depth of those three issues [...]

"We should not take any further action on interest rates until these issues are resolved, for better of for worse, so I would be an advocate of taking no action [...] that could change if things improve but my own view right now is that we should be patient [...]."

The policymaker also said he was open to slowing the pace at which the Fed continued to 'taper' its balance sheet, although he was not advocating interest rate cuts.

Kaplan, who up until recently had been on the more dovish side of the spectrum in terms of his views on monetary policy, was not a vote wielding member on the Federal Open Market Committee in 2019.

In response to his remarks, as of 1411 GMT, the yield on the benchmark two and ten-year US Treasury notes were rising by two basis points to 2.50% and 2.64%, respectively.