Goldman Sachs analyst Robert Kaplan stated that the Fed’s decision to keep interest rates unchanged in July was “absolutely correct,” adding that policymakers should approach the data coming in until September with transparency.
According to Kaplan, the increasing complexity of the factors influencing the inflation outlook makes it risky for the Fed to adopt rigid policy guidance prematurely. Kaplan stated that economic data released until the September meeting should be carefully evaluated.
Kaplan stated, “If I see meaningful improvement, I may be willing to keep interest rates steady. However, until September, I want to take advantage of every opportunity and not stick to a rigid or predetermined view.”
AI is affecting inflation in two different ways. #
Kaplan pointed out that in the current economic environment, there are numerous factors creating both upward and downward pressure on inflation.
Kaplan stated that strong investments in AI infrastructure, tariffs, labor supply constraints, and rising oil prices could increase inflationary pressures, but on the other hand, AI applications can increase productivity, reduce costs, and accelerate the disinflation process.
Therefore, Kaplan argued that the Fed should assess economic developments holistically, rather than focusing on a single factor.
He delivered a message for the Jackson Hole speech. #
Kaplan also commented on Federal Reserve Chairman Warsh’s speech at the Jackson Hole Economic Policy Symposium this month.
According to Kaplan, instead of giving a purely “philosophical” speech, Warsh should briefly and clearly explain why the Fed kept interest rates unchanged in July. Such an explanation, he noted, could help markets better understand the Fed’s current policy approach.
Kaplan argued that the rise in long-term US Treasury bond yields in global markets was not directly caused by Fed policies. According to the analyst, the rise in bond yields is fundamentally due to the structural supply-demand imbalance created by persistently high budget deficits in the US.
*This is not investment advice.