Robert Kaplan, president and chief executive officer of the Federal Reserve Bank of Dallas, speaks at a conference on May 24, 2018. (Cooper Neill/Bloomberg).

Dallas Federal Reserve President Robert Kaplan has joined the chorus of central bank leaders hinting strongly that an interest-rate cut is coming at the end of July, but he does not see the need for additional cuts this year.

Kaplan said Tuesday that he could support a “modest tactical adjustment” down in interest rates.

“Not the start of a rate-cutting cycle, but a tactical adjustment that’s restrained and modest? That might be appropriate. I could see an argument for that,” Kaplan told The Washington Post in an interview Tuesday.

Wall Street is pricing in nearly a 100 percent probability that the Fed will cut rates when central bank leaders meet on July 31 to make their decision. The question on many investors’ minds — and that of President Trump, who has been urging the central bank to reduce rates — is whether the Fed will keep cutting after July.

Many big banks believe the Fed will cut in July, September and December, a much more significant reduction to stimulate the economy. But Kaplan said the U.S. economy remains quite healthy, even with Trump’s trade war and the weak growth overseas. He does not believe the economy needs a lot more aid.

“I think growth seems to be stabilizing around 2 to 2.25 percent. In other words, we’re still growing at or above potential,” he said. “That could change, but that’s still my view.”

He said he has spoken extensively to business leaders in Texas who have told him that they were spooked in late May by Trump’s threat to impose tariffs on all Mexican imports unless the Mexican government took significant steps to curb migration from Central America to the United States. But Trump pulled back on that threat, and businesses appear to be less fearful now of a major disruption to commerce at the southern border.

In Kaplan’s eyes, the main justification for a rate cut now is to align the official Fed interest rate more closely with what the bond market says the interest rate should be.

The Fed has interest rates set in a range of 2.25 to 2.5 percent, Kaplan noted, while the bond market implies Wall Street thinks interest rates should be closer to 2.14 percent.

“This doesn’t look right to me,” Kaplan said, but he is not ready to signal anything more than one cut. “Monetary policy accommodation is not free. It creates excesses and imbalances. It’s not free and so you want to use it judiciously.”

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