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Robert Kaplan, president of the U.S. Federal Reserve Bank of Dallas

Kaplan is a voting member on the FOMC, though he will not be in 2018. He will, however, still provide policy input, and indicated he is in favor of the Fed hiking rates “in the near future,” part of what he hopes will be “gradual and patient” removal of the historically high level of accommodation the Fed has provided since the financial crisis.

The market is pricing in a near-certainty of a rate hike at the committee’s December meeting.

“I would like to avoid a situation where the FOMC is playing ‘catch-up’ in raising interest rates,” he said.

In addition to stocks, Kaplan pointed out that corporate and government debt levels have been rising rapidly.

But he’s less concerned with corporate America’s balance sheet than he is with the government’s $20.5 trillion in IOUs. Of that total, the public owes $14.9 trillion, which is about 75 percent of GDP.

“In my view, the projected path of U.S. government debt to GDP is unlikely to be sustainable —and has been made to appear more manageable due to today’s historically low interest rates,” Kaplan said.

All of that is happening as the economy is nearing full employment and not far from exceeding that level, defined as the point where all adults willing and able to work have jobs. “Monetary policy accommodation is not ‘free,'” Kaplan said, adding he is worried that waiting too long after the full employment threshold is crossed also will have costs.

“There are surprisingly few historical examples of ‘soft landings’ in cases where employment has risen above its maximum sustainable level,” he said.

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