Wires

Fed's Kaplan says monetary policy has limits

THE WOODLANDS, Texas, Oct 3 (Reuters) - Dallas Federal Reserve Bank President Robert Kaplan on Thursday said Europe's experience with negative interest rates shows that there are limits to monetary policy, and that broader economic policies are needed to boost growth.

The Fed last month cut its overnight policy rate by a quarter of a percentage point for the second time this year, to target a range between 1.75% and 2.0%, and traders are increasing bets on a third rate cut this month after a report Thursday showed the services industry grew more slowly than expected last month.

Kaplan said keeping rates too low for too long encourages risk taking and corporate borrowing, which could set the economy up for bigger downturn than otherwise if that debt starts to sour. (Reporting Jennifer Hiller, by Writing by Ann Saphir, Editing by Franklin Paul)