The Fed's Tightrope: Inflation, Labor, and the Path Ahead

In this episode of Goldman Sachs Exchanges, Allison Nathan interviews Robert Kaplan, former president of the Dallas Fed and current vice chairman of Goldman Sachs, about the Federal Reserve's upcoming decisions. Kaplan discusses the complexities the Fed faces due to conflicting economic signals, including a weak labor market offset by potential tailwinds from tax incentives and regulatory reforms. He also addresses concerns about inflation, which is running above target, and the impact of tariffs on businesses. Kaplan believes the Fed's decision on a December rate cut is highly uncertain, influenced by both economic data and internal debates within the committee, and he emphasizes the need for the Fed to carefully balance the risks of acting prematurely versus waiting for more clarity. He also touches on the Fed's independence and potential future shifts in balance sheet management.