Episode summary
Powell Should Leave The Door Open to Cut in December Says Kaplan
Bloomberg Surveillance
· · 6 min · Guests: Rob Kaplan
Summary
Rob Kaplan said the Fed is likely to cut rates tomorrow and may also end quantitative tightening, but he sees the key question as whether Jay Powell leaves the door open to a December cut. Kaplan argued Powell should preserve that optionality because markets are already pricing a December move, even though inflation remains far above target.
Kaplan then shifted to AI and productivity, saying advances in AI should ultimately lift the whole economy but will create near-term disruption for business and workers. His emphasis was that the United States is weak at retraining and redeploying displaced workers, and that the process has to happen locally through companies, schools, junior colleges, and community institutions rather than through a national one-size-fits-all solution.
He warned that if the labor-market adjustment around AI and technology disruption is mishandled, it could trigger another political backlash like the one that followed globalization. Kaplan argued that more public and private money should go into skills training instead of pushing more students into college, which he said often fails to produce graduates even after six years.
Key takeaways
- Kaplan expects the Fed to cut tomorrow and likely end quantitative tightening, but says Powell should still keep a December cut on the table.
- Kaplan says AI should boost productivity for the whole economy, but in the near term the gains will mainly show up for business.
- Kaplan argues the U.S. is poor at retraining displaced workers and needs local solutions through companies, junior colleges, and schools.
- Kaplan warns that mishandling AI-driven job disruption could fuel political backlash similar to the reaction to globalization.
- Kaplan says more money should go into skills training than into sending more students to college first.
Notable quotes
“I think the only possible surprise is I think Jay Powell, I believe, should leave the door open to cutting in December”
“This year, advances in A.I. will boost productivity. For whom”
“So ideally, ultimately for the whole for the whole economy, it for sure, in the near term, over the next two years for business”
“We need to make use of every able bodied worker. Right”
“instead of giving money for more kids to go to college who aren't graduating even in six years”
How the episode opens
I don't know. They're going to be surprises. They're going to cut tomorrow.
They're going to announce. I would guess they're going to end quantitative tightening. Those aren't surprises.
I think the only possible surprise is I think Jay Powell, I believe, should leave the door open to cutting in December. The markets are pricing in that they're going to cut in December. But he's going to want to leave some optionality just in case they're getting closer to neutral.
Inflation is still running 7500 basis points above target. So it might be taken some as a little bit more independent, wanting optionality, although I don't think they should be surprised by that. It's great to have you in here.
You're the only one I can think of as equivalence. Richard Fisher The modern age folks, Robert Kaplan's understanding a business process, how to succeed and also how to enjoy failure is second to none nationwide. Mark Wynne and Lilian Dear of the Dallas Fed.
This year, advances in A.I. will boost productivity. For whom?
Mr. Kaplan Yeah. So ideally, ultimately for the whole for the whole economy, it for sure, in the near term, over the next two years for business, the trick will be to get those gains and the whole economy, the workers that lose their jobs will have to get retrained and redeployed into other productive jobs.
And that's what we haven't been great at in the United. I was going to say good morning to North Carolina in the Deep South is clothing manufacturing disappeared in the last part of the century. All of us have been humbled by our elders failures, it retraining.
We're not Germany, are we? No. And the problem is this can't be done nationally.
Has to be done locally. Worker mobility.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed decision
- interest rates
- december rate cut outlook
- us economy
- ai economic impact
Companies and tickers mentioned
- GS
- Goldman Sachs
Watch the episode
Watch “Powell Should Leave The Door Open to Cut in December Says Kaplan” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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