Bloomberg Surveillance Breaking Down the Fed's Interest Rate Cut
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Sep 18, 2025 
Robert Kaplan, the former Dallas Fed president and current vice chairman at Goldman Sachs, dives deep into the recent Fed interest rate cut. He explores whether the U.S. economy is headed toward recession and how AI is driving a productivity boom. Kaplan also discusses the challenges posed by tariffs on small firms and shares insights on the future of semiconductor investments. His perspective highlights the Fed's internal debates and the balancing act between inflation and labor market stability.
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Fed Faces Growing Inflation Communication Problem
- Frances Donald says the Fed must "talk their way" through painful inflation trade-offs after revealing their hand.
- She warns services inflation will become more problematic into year-end, complicating policy.
Shift In Job Composition Reduces Rate Sensitivity
- Donald notes one-third of US jobs are in government, health care, or social assistance and are interest-rate insensitive.
- That structural shift weakens monetary policy's ability to cool the labor market quickly.
Inventories Are The Critical Data Point
- Donald identifies inventories as the key single data point that will decide inflation paths and Fed focus.
- She says firms may either pass costs to consumers or cut costs via labor, producing very different policy outcomes.