Former Fed Official Predicts September Rate Cut Amid Cooling Labor Market

Robert Kaplan, former Dallas Fed president and Goldman Sachs vice chairman, anticipates the Federal Reserve will initiate interest rate cuts in September. He cites a softening labor market, declining consumer demand, and excess capacity in goods markets as key drivers. "Job creation has essentially stalled," Kaplan noted, emphasizing that headline unemployment figures obscure underlying economic weakness.

Disinflationary pressures from AI advancements further support the case for monetary easing. However, Kaplan cautioned against interpreting a potential September rate cut as the start of an aggressive cycle. The Fed is more likely to adopt a measured, meeting-by-meeting approach, with a possible 25-basis-point reduction followed by reassessment.

Tariff-induced inflation remains a non-issue in Kaplan's view, as price pressures predominantly stem from the services sector. Goods tariffs may cause temporary bumps but lack the persistence to derail disinflation trends.