WSJ's Take On the Week Goldman Vice Chairman and Former Fed Official Kaplan on Rate-Cut Dilemma
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May 4, 2025 
Rob Kaplan, vice chairman at Goldman Sachs and former president of the Dallas Fed, shares his insights on the Federal Reserve's complex challenges in managing inflation and interest rates. He discusses the implications of slow GDP growth and the risks of stagflation, while diving into the debate over Fed independence amid political pressures. Kaplan also touches on the current market dynamics, covering trade deal impacts and international investment uncertainties. His expertise sheds light on the critical balance the Fed must maintain in turbulent economic waters.
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Fed Navigates Structural Changes
- The Federal Reserve faces uncertainty due to multiple structural economic changes driven by government policies like tariffs and immigration.
- It must wait for clarity on these policies before adjusting interest rates, while still focusing on fighting inflation.
Stagflation Threat Explained
- Stagflation presents a combination of slower economic growth and persistent inflation due to policies like tariffs and workforce changes.
- The Fed is working to balance these opposing forces that slow growth and keep prices high.
Tariffs Shift Inflation Dynamics
- Inflation now involves cost-push pressures from tariffs on goods, unlike previous demand-driven inflation.
- The Fed is uncertain how reduced growth might offset these cost increases, complicating inflation management.