WEBVTT - Robert Kaplan Talks Fed Decision, Policy in 2026

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. Robert Kaplan with US

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<v Speaker 1>right now is affiliated with Golden SAX and of course

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<v Speaker 1>his public service at the Dallas Fed. This is great.

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<v Speaker 1>I thought Austin Goulesby's descent yesterday was really something with

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<v Speaker 1>his technology bent his workout at MIT at Chicago. Now,

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<v Speaker 1>I just, you know, my own individual opinion is gools

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<v Speaker 1>be something really worth watching here. Mark Winn is out

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<v Speaker 1>of Ireland Rochester has a shingle out at the Dallas Fed.

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<v Speaker 1>And of course Mark Wynn, under your student guidance years ago,

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<v Speaker 1>has a spectacular essay out on AI. In the summary

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<v Speaker 1>of Mark Winn's work is we just don't know, do we. Well.

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<v Speaker 2>I think we're in the early stages of AI adoption.

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<v Speaker 2>Most of the talk about AI right now it's about

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<v Speaker 2>the infrastructure build. But that's different than the downstream adoption.

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<v Speaker 2>We're in the first or second. I think my own

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<v Speaker 2>view and I think the view of my firm is

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<v Speaker 2>when we talk five years from now, we'll see a

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<v Speaker 2>half a percentage point gain in productivity growth for GDP

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<v Speaker 2>and it will help business. But which use cases work

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<v Speaker 2>and which don't. We're going to spend the next three

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<v Speaker 2>years trying to figure that out.

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<v Speaker 3>Net is it positive for the economy and how material

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<v Speaker 3>because a lot of folks are hanging their hat on

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<v Speaker 3>AI is really being a productivity enhancered to really impact

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<v Speaker 3>the economy.

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<v Speaker 2>If you got a half a percentage point jump in

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<v Speaker 2>productivity growth, that's a huge deal. So we have sluggish

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<v Speaker 2>workforce growth in the United States, we don't have much

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<v Speaker 2>immigration at the moment. Bulk of our GDP growths got

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<v Speaker 2>to come from productivity growth. So AI is very important

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<v Speaker 2>to the world and to the US, And yeah, half

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<v Speaker 2>a percentage point would be a big deal.

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<v Speaker 3>Would you take away yesterday from the FED meeting here?

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<v Speaker 2>Pretty straightforward? I think that I think in the room

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<v Speaker 2>there was a lot more disagreement than it may have

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<v Speaker 2>looked like, only a couple of descents. But we're at

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<v Speaker 2>or near neutral. I think Jpell even said that it

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<v Speaker 2>shows confirms that. I think the neutral rate nominal is

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<v Speaker 2>about three and a half three and three quarters, and

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<v Speaker 2>some of the folks say, with inflation at two and

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<v Speaker 2>three quarters and the job market likely to firm in

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<v Speaker 2>the next year, we shouldn't be at neutral. And I

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<v Speaker 2>think overall they bought insurance in case, the labor market's

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<v Speaker 2>weaker than they thought. But from here it will be

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<v Speaker 2>a conventional FED, meaning something's got changed to move the rate,

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<v Speaker 2>either unemployment needs to worsen or inflation needs to improve.

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<v Speaker 1>Accross the nation. Robert Kaplan with us of Gulbyn Sachs's

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<v Speaker 1>former services, the Dallas FED. So I said, we say

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<v Speaker 1>good morning to Texas as well. So I look at

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<v Speaker 1>yesterday's meeting and I look at all the what ifs

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<v Speaker 1>that are out there, and the bottom line is a

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<v Speaker 1>dual mandate. And I kept carrying them back and forth

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<v Speaker 1>on the dual mandate. What's the history that you've studied

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<v Speaker 1>of whether they focused on inflation or jobs? And don't

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<v Speaker 1>tell me both, because it's really hard to do that well.

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<v Speaker 2>For a lot of the last ten or fifteen years,

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<v Speaker 2>the Fed had the luxury exact pre COVID of not

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<v Speaker 2>having an inflation problem, so it could focus heavily on

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<v Speaker 2>what was going on employment. And I thought employment was weakening.

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<v Speaker 2>It could move post COVID, and I would argue with

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<v Speaker 2>this boom in government spending we had in twenty twenty one,

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<v Speaker 2>twenty two and twenty three, which probably caused supply chain

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<v Speaker 2>dynamics to create an excess demand issue. They got to

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<v Speaker 2>deal with both, and it's harder to deal with both,

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<v Speaker 2>and so then they have to make trade off decisions

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<v Speaker 2>and that's hard to do. And having said that, I

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<v Speaker 2>think they've done a reasonable balancing job. But that's the

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<v Speaker 2>reason for the division in the group. It's not that

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<v Speaker 2>they prioritize one over the other. I think the fact

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<v Speaker 2>is we've had three headwinds. One in the short run,

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<v Speaker 2>tariffs are slowing growth, the immigration policy is slow growth.

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<v Speaker 2>And the shutdown, as you would expect to slow growth,

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<v Speaker 2>but the shutdown is reversing. And going into twenty six,

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<v Speaker 2>we're gonna have tax incentives. We've got this AI boom continuing,

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<v Speaker 2>and I think the economy is likely to firm and

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<v Speaker 2>you saw that in the dot plot. And people are saying,

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<v Speaker 2>you know, the labor weakness is going to affirm. Let's

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<v Speaker 2>do nothing, and that's the reason for the debate.

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<v Speaker 3>Interesting, when you talk to your corporate clients at Goldman Sachs,

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<v Speaker 3>what is their view for twenty twenty six we're seeing

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<v Speaker 3>I kind of look at M and A as a

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<v Speaker 3>barometer of how confident the c suite is and the

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<v Speaker 3>board is, and we're seeing a big M and a

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<v Speaker 3>trade going crazy out there with Warner Brothers Discovery. When

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<v Speaker 3>you talk to your corporate clients, are they confident about

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<v Speaker 3>their ability in twenty twenty six to maybe grow?

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<v Speaker 2>I think most companies believe as we do that twenty

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<v Speaker 2>six you'll see firming GDP growth because of tax and

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<v Speaker 2>centers and other reasons. However, I've never seen a period

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<v Speaker 2>in my business career where there wasn't a bigger concern

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<v Speaker 2>about the need for size and scale to afford the

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<v Speaker 2>technology investment that's driving a lot of merger activity.

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<v Speaker 1>We've covered this a number of times this week as well.

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<v Speaker 1>So then, do we head towards a monopsisistic America? Do

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<v Speaker 1>we have a capitalism that is essentially a big roll

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<v Speaker 1>up to get to CAPEX scale?

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<v Speaker 2>I think you're going to have lots of still small

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<v Speaker 2>emerging businesses powered by AI that can grow and will

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<v Speaker 2>be very attractive, and they'll get to a point where

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<v Speaker 2>they kind of stabilize. You'll have lots of very big,

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<v Speaker 2>huge scale companies that are dominant, and you're gonna have

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<v Speaker 2>a lot in between. And I guess we'd say it

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<v Speaker 2>in between has gotten a lot bigger and the last

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<v Speaker 2>companies that used to think they were big and dominant

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<v Speaker 2>and still aren't less dominant.

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<v Speaker 1>I looked at Procter and Gamble carefully. He said, I

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<v Speaker 1>don't want you to comment on individual security, But what

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<v Speaker 1>does old industry do in there? In between this.

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<v Speaker 2>Build size and scale and make more investment in efficiency, productivity,

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<v Speaker 2>technology and so all that costs money and in the

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<v Speaker 2>short run reduced as margins. And that's why you also

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<v Speaker 2>see a lot of bell tightening right now right now

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<v Speaker 2>to offset some of the margin impact.

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<v Speaker 3>One of the newer developments capital markets. Why is there

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<v Speaker 3>the last fifteen years have been private credit? What's your

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<v Speaker 3>view there?

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<v Speaker 2>I mean, we tend to view it as a continued

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<v Speaker 2>private credit. I'd say has been has been a good addition.

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<v Speaker 2>It's been a good addition to bank lending. The only

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<v Speaker 2>comment I would make, on the other hand is investment

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<v Speaker 2>crede credit spreads are very tight, but it's investment grade.

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<v Speaker 2>I think the watch out is the lesson investment great

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<v Speaker 2>side of private credit. We haven't had a credit cycle

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<v Speaker 2>in many years. We're not going to have one. I

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<v Speaker 2>don't think in twenty six we'll have one eventually, And

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<v Speaker 2>so there's a lot of money flowing in to lesson investment,

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<v Speaker 2>great private credit. Be careful about that.

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<v Speaker 1>Robert Caplin, thank you so much, greatly greatly appreciated, of course,

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<v Speaker 1>the former president of Dallas FED and with Goldman sachs

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<v Speaker 1>Now and of course an affiliation with Harvard over the

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<v Speaker 1>years