The Federal Reserve is likely to reduce interest rates in September in light of recent progress on inflation, but the move isn’t likely to mark the beginning of a full-fledged rate-cut cycle, according to the former president of the Fed’s Dallas branch.
“Its path for September is pretty clear,” Robert Kaplan, who left the Fed in October 2021 and is now vice chairman at Goldman Sachs Group Inc., said Thursday. “I think there’s a good chance they could do one more cut in December.”
“That doesn’t mean we’re going to kick off a rate-cutting cycle,” because fiscal deficits are high and energy prices remain high,” he told Bloomberg TV in Tokyo. “It’ll be one meeting at a time.”
Kaplan was speaking after a number of Fed officials led by Chair Jerome Powell noted in recent weeks that the central bank is making some progress toward lowering inflation to its 2% goal, though they have been vague about the timing of interest rate cuts.
Inflation slowed in the second quarter, with the so-called core consumer price index rising just 0.1% in June, marking the smallest monthly advance since 2021.
As for Japan, Kaplan noted that the economy faces headwinds due to demographic trends that are eroding the workforce.
