The Federal Reserve has left interest rates unchanged as inflation continues to cool. Former Dallas Federal Reserve Bank president and Goldman Sachs Vice Chairman Robert Kaplan joins Market Domination to discuss the state of inflation and when an interest rate cut may occur.
"I think they’re well positioned. People have to remember that we’ve got very restrictive monetary policy, but you have pretty accommodative fiscal policy that’s blunting some of that monetary policy. That’s part of the reason why the economy’s remained resilient," Kaplan explains. He adds that the Fed is getting prepared to cut rates potentially in September as more economic data provides a clearer inflation picture.
As the Fed continues to remain cautious, Kaplan continues, "If all you had was restrictive monetary policy, I’d have a lot more confidence that we’re going to see a slowing in the economy. But we don’t have just that. We have accommodative fiscal policy. We’ve got these open-ended spending programs like the Inflation Reduction Act, CHIPS Act, and the Infrastructure Act. We also have globalization that has become deglobalization, which is increasing costs. You have a very expensive energy transition, and remember, we’ve got an aging society, so we’ve got shortages of labor, particularly in the service sector. And so how these crosscurrents play out, there’s really not a textbook for it."
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