Episode summary
Fed Projects One Cut in 2026
Bloomberg Surveillance
· · Guests: Robert Kaplan
Summary
Robert Kaplan said the Fed’s latest cut looked less like a decisive pivot and more like buying insurance against a weaker labor market. He argued the committee is now near neutral, with the policy debate shifting to whether unemployment worsens or inflation improves enough to justify another move. In his view, the disagreement inside the Fed was deeper than the 9-3 vote suggested, because officials are still balancing inflation risks against signs of labor-market softness.
He also framed 2026 as a year when growth could firm. Kaplan pointed to fading shutdown effects, expected tax incentives and a continuing AI boom as reasons companies believe GDP growth should improve. At the same time, he said tariffs and immigration restrictions are slowing growth now, which helps explain why policymakers remain divided.
Kaplan spent much of the conversation on corporate behavior, saying M&A is being driven by the need for scale to fund technology investment. He expects a market with more large dominant companies and many smaller ones in between, while warning that the push for efficiency and technology spending can pressure margins and increase belt tightening. On credit, he viewed private credit as a useful addition, but cautioned that the less-than-investment-grade part of the market deserves care.
Key takeaways
- Kaplan said the Fed is “at or near neutral” and may need a real change in unemployment or inflation before cutting again.
- He expects 2026 GDP growth to firm because of tax incentives, a continuing AI boom and the end of shutdown effects.
- Kaplan said tariffs, immigration policy and the shutdown are the three near-term headwinds slowing growth now.
- He sees M&A as a response to the need for size and scale to finance technology investment.
- Kaplan called private credit a “good addition” but warned about the buildup of risk in less-than-investment-grade lending.
Notable quotes
“If you got a half a percentage point jump in productivity growth, that's a huge deal”
“I think that I think in the room there was a lot more disagreement than it may have looked like”
“I think overall, they bought insurance in case the labor markets weaker than they thought”
“I think most companies believe, as we do that 26, you'll see firming GDP growth because of tax incentives and other reasons”
How the episode opens
If you got a half a percentage point jump in productivity growth, that's a huge deal. Yeah. So we have sluggish workforce growth in the United States.
We don't have much integrate immigration at the moment. Bulk of our GDP growth got to come from productivity growth. So AI is very important to the world and to the U.S..
And yeah, half a percentage point would be a big deal. Would you take away yesterday from the Fed meeting here? Pretty straightforward.
I think that I think in the room there was a lot more disagreement than it may have looked like. Only a couple of dissents, but we're at or near neutral. I think Jay Powell even said that it shows confirms that.
I think the neutral rate, nominal is about three and a half, three and three quarters. And some of the folks say with inflation at two and three quarters and the job market likely to firm in the next year, we shouldn't be at neutral. And I think overall, they bought insurance in case the labor markets weaker than they thought.
But from here it will be a conventional Fed, meaning something's got to change to move the rate. Either unemployment needs to worsen or inflation needs to improve across the nation. Robert Kaplan with us of Goldman Sachs is for our services at the Dallas Fed.
As I said, we say good morning to Texas as well. So I look at yesterday's meeting and I look at all the what ifs that are out there. And the bottom line is the dual mandate.
And I kept hearing a back and forth and the dual mandate. What's the history that you studied of whether they focused on inflation or jobs? And don't tell me both, because it's really hard to do that as well.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed rate cuts
- 2026 rate outlook
- ai economic impact
- treasury yields
- labor market vs inflation
Companies and tickers mentioned
- GS
- Goldman Sachs
Watch the episode
Watch “Fed Projects One Cut in 2026” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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