Fed's Kaplan argues for three rate hikes over the next year or so

The US central bank should continue hiking interest rates, but be mindful of the 'message' government debt markets are sending.

According to the President of the Federal Reserve bank of Dallas, Robert Kaplan, the Federal Reserve should raise the Fed funds rate three more times before it pauses to see where it stands relative to the so-called 'neutral' rate.

In remarks to the Economic Club of New York, Kaplan said the message from the flattening in the Treasury curve over recent months was that "prospects for future growth are somewhat sluggish or uncertain".

Kaplan indicated he would be "comfortable" if over the next year or so the Fed raised interest rates "another three times [...] that doesn't seem unreasonable to me," even as he acknowledged that it was difficult to know what the point was beyond which monetary policy would stop being stimulative and turn restrictive.

CNBC meanwhile had Kaplan on record, saying: "the longer end is saying boy A) there's a lot of money looking for safe assets. But also it's saying out-year growth is a little more uncertain."

The rate-setter reportedly also indicated he was glad Washington had renegotiated the terms of the North American Free Trade Agreement, especially with Mexico, while stressing the importance of immigration for sustaining economic growth in the US given low labour productivity.

As of 1515 BST, the yield on the benchmark 10-year US Treasury note was down by two basis points at 3.22%.