September May Bring Rate Cut, Says Former Dallas Fed President Robert Kaplan: 'I Think There's A Good Chance...'

Robert Kaplan, the former president of the Federal Reserve’s Dallas branch, in light of recent progress on inflation, predicts a potential interest rate cut in September. However, he does not anticipate this to mark the beginning of a full-fledged rate-cut cycle.

What Happened: Kaplan, who is currently the vice chairman at Goldman Sachs Group Inc., suggested that the Fed might consider a rate cut in September, with the possibility of another in December, reported Bloomberg on Thursday.

“Its path for September is pretty clear… I think there's a good chance they could do one more cut in December,” Kaplan said.

He emphasized that this does not necessarily indicate the start of a rate-cutting cycle, given the persistently high fiscal deficits and energy prices.

His comments come in the wake of several Fed officials, including Chair Jerome Powell, acknowledging the central bank’s progress in reducing inflation. The core consumer price index saw a modest 0.1% rise in June, the smallest monthly increase since 2021.

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Regarding Japan, Kaplan highlighted the country’s economic challenges due to demographic trends that are depleting the workforce.

Why It Matters: Kaplan’s prediction aligns with recent hints from other Fed officials. On Wednesday, John Williams, President of the New York Federal Reserve, suggested that a rate cut could be imminent if inflation continues to slow.

Additionally, Lisa Cook, a Federal Reserve Governor, emphasized the central bank's readiness to respond swiftly to any surge in unemployment. Speaking in Australia, Cook highlighted the Fed’s vigilance regarding the unemployment rate, which currently stands at 4.1%.

Mohamed El-Erian, chief economic adviser at Allianz, had previously called for a rate cut in July, citing the rapid economic slowdown. However, he expressed skepticism about the Fed taking this step, given the uncertain economic environment.

Read Next:

• Powell Praises Latest Inflation Progress, Hints At Imminent Rate Cuts, Warns He’s ‘Very Worried’ About Unsustainable National Debt

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote