August jobs data may sway Fed’s September plans: Fmr. Fed CEO

Investors are anticipating a potential Federal Reserve interest rate cut in September, though the future of monetary policy remains uncertain. Goldman Sachs (GS) Vice Chairman and former Federal Reserve Bank of Dallas CEO and president Robert Kaplan joins Market Domination to share his perspective on potential Fed cuts.

Kaplan believes a 25-basis-point cut could occur in September, but emphasizes that the August Jobs report will significantly influence the Fed’s decision. He notes that with the unemployment rate ticking up, “we wanted the labor market to cool,” though he cautions, “we don’t want it to weaken substantially from here.”

“I think the reason, from a risk management point of view, you want to start cutting in September… you want to see the risk now as more balanced between inflation and unemployment. Having said that, the inflation fight is not over,” Kaplan tells Yahoo Finance.

Regarding concerns about the Fed being behind on a rate cut, Kaplan acknowledges “there is a lag” in the economy due to monetary policy. However, he believes that if the Fed were to miss a meeting where they should have implemented a cut, markets would view it as “a tactical issue.” Kaplan stresses, “We’ve been in the midst of a very severe inflation fight, where inflation’s been averaging almost 4.5% a year,” and affirms that “the Fed was right” to prioritize bringing inflation down rather than cutting rates prematurely.

Nevertheless, Kaplan suggests, “I think you can still fight inflation but be less restrictive than they are, and so I think they have room here to cut two or three times and still be fighting inflation.”

In regards to the election outcome and it’s impact on Federal Reserve operations, Kaplan tells the Market Domination Overtime team: “An independent Fed that makes decisions on the Fed funds rate without regard to political influence or political pressure, I think is essential.”

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Angel Smith