Robert Kaplan, the former president of the Federal Reserve Bank of Dallas and current vice chairman of Goldman Sachs, is sounding the alarm on inflation. His message is straightforward: if inflation prints don’t cool over the summer, the Fed will face mounting pressure to double down on price stability, even if that means keeping rates elevated longer than markets want.
The case for continued restraint
Kaplan’s argument centers on a simple premise. The Fed won’t consider cutting rates until there are noticeable improvements in inflation data.
Kaplan isn’t just some retired central banker musing from a beach chair. He joined Goldman Sachs in 1983, made partner by 1990, and has occupied the vice chairman seat since January 2021. When he speaks about Fed dynamics, he’s drawing on both sides of the fence: years running a regional Fed bank from 2015 to 2021, and years navigating markets at one of Wall Street’s most influential firms.
His current read on the economy points to strong GDP growth expectations, which sounds great until you remember that robust growth can be inflationary. A hot economy gives the Fed less room to ease, not more.
