I’ve been watching the back-and-forth around interest rates for months now, and every time the Federal Reserve meets I find myself asking the same quiet question: are they finally going to move, or will they keep waiting? When the July decision landed and rates stayed put at 3.50% to 3.75%, a lot of people shrugged. Markets barely twitched. But then Rob Kaplan, the former Dallas Fed president who now sits as vice chairman at Goldman Sachs, came out and said something that stuck with me. He called the hold “absolutely” the right call. Not just sensible. Absolutely right. That kind of language from someone who used to sit inside the room makes you stop and listen.
Why the July Hold Felt Correct at the Time
Kaplan’s point is pretty straightforward once you sit with it. Officials still had weeks before the September meeting. There was no emergency forcing their hand. Inflation data was cooling in some places, heating up in others, and the economy was sending mixed signals. Rushing into a hike would have locked them into a path they might later regret. Better to keep every option open and actually study the numbers as they arrived.
He put it this way: if meaningful improvement shows up, staying put could make sense. But the key is using every remaining moment before September without rigidity or preconceived notions. That line feels important. Too many people want the Fed to telegraph its next move like a weather forecast. Kaplan is arguing for the opposite. Stay flexible. Look hard. Decide later.
It’s worth remembering that three voting members actually preferred a quarter-point increase. The presidents of the Cleveland, Dallas, and Minneapolis banks dissented. So the 9–3 vote wasn’t unanimous by any stretch. Disagreement inside the committee is real. That alone suggests the decision wasn’t obvious or automatic. It was a judgment call, and Kaplan believes the majority got it right.
The Forces Pulling Inflation in Opposite Directions
What makes the September decision so tricky is the set of competing pressures Kaplan keeps highlighting. On one side you have heavy spending on artificial intelligence infrastructure. Companies are racing to build data centers. That means power, land, specialized equipment, and skilled workers. All of those things cost money and can push prices higher in the short term. Tariffs add another layer by raising the cost of imported goods and materials. Labor markets remain tight in certain sectors, which can force wages up. And oil prices have been volatile enough to feed through into fuel, shipping, and production costs.
Yet the same technology that is driving all that capital spending might eventually ease inflation. If artificial intelligence helps businesses produce more with the same number of workers, unit costs can fall. The productivity gains just take time to show up. Right now we’re still in the expensive build-out phase. That tension—higher costs today, potential relief later—makes the inflation picture genuinely hard to read.
I’ve found that when several strong forces are pushing in different directions at once, the safest posture is often patience. Kaplan seems to share that view. Locking in a rate path too early risks missing the actual turning point.
What Recent Inflation Numbers Actually Showed
The July Consumer Price Index came in roughly as expected. Prices rose 0.1% for the month and 3.4% over the previous year. Core inflation, which strips out food and energy, moved up 0.2% monthly and stood at 2.5% annually. The yearly core rate eased a touch from the prior reading, but the overall picture is still above the Fed’s 2% target. Not dramatically above. Just stubbornly above.
Markets reacted in a measured way. Probability of no change in September hovered around two-thirds after the report. Bitcoin, which often moves with shifts in rate expectations, recovered modestly but stayed inside its recent range. Traders weren’t treating the data as a green light for a cut or a red light for a hike. They were treating it as more of the same careful waiting game.
Employment Data Added Another Wrinkle
Then came the jobs numbers. Nonfarm payrolls fell by 23,000 in July when most forecasts had looked for a solid gain. Revisions knocked more than 100,000 jobs off the previous two months combined. One weak report doesn’t rewrite the entire labor market story, but it does raise questions about momentum. After the release, the odds of a September hold moved higher again.
Kaplan didn’t treat the payrolls print as decisive on its own. Energy prices and shipping risks remain elevated. A single soft jobs number in the middle of those cross-currents is interesting, not conclusive. Still, it reinforces the case for keeping options open rather than committing early.
The Bigger Worry Sitting Beyond the Federal Funds Rate
Here’s where Kaplan’s comments get more interesting. He says he is more concerned about long-term Treasury yields than about the overnight federal funds rate itself. That distinction matters. The policy rate the Fed controls directly is an overnight rate between banks. Longer-dated Treasury yields shape mortgage rates, corporate borrowing costs, and the government’s own financing expenses.
According to Kaplan, the rise in long-term yields across several countries reflects a structural imbalance. Governments keep issuing large volumes of debt to cover persistent deficits. Investors eventually demand more compensation to absorb that supply. The result is higher yields even when central banks hold their short-term rates steady.
Recent deficit figures underscore the point. The federal budget deficit hit a high monthly number in July, and the fiscal-year total through that month was substantial. Calendar quirks inflated the headline, but the underlying shortfall was still larger than a year earlier. Heavy Treasury issuance can keep upward pressure on yields regardless of what the Fed does with the federal funds rate.
A 30-year bond auction in mid-August cleared at a yield not seen for that maturity in more than two decades. That kind of borrowing cost for the government has real consequences. It also changes the relative attractiveness of other assets. When safe government paper offers higher returns, demand for riskier assets can soften. Bitcoin and other non-yielding assets feel that competition.
What Jackson Hole Could Clarify
With the annual economic symposium in Wyoming approaching, Kaplan offered a practical suggestion. The Fed chair should use the platform to explain, at least briefly, why the committee chose not to move in July. A purely philosophical speech would leave investors still guessing about the decision-making process. Clearer reasoning doesn’t require a firm commitment on September. It simply helps people understand the evidence that mattered and the evidence that didn’t.
I’ve always thought Jackson Hole speeches land differently when they acknowledge the hard trade-offs instead of floating above them. Markets respond to transparency. They don’t need a promise about the next vote. They need a coherent story about how the data is being weighed.
Keeping the Conversation Grounded in Reality
One thing I appreciate about Kaplan’s framing is how careful he is to separate his current role from his former one. He is no longer a policymaker. His comments reflect an informed private-sector assessment, not an official Fed position. That honesty helps. It also reminds everyone that outside voices can still shape the conversation without pretending to speak for the committee.
The broader lesson feels useful beyond this particular meeting cycle. When inflation pressures are mixed, employment data is uneven, and fiscal realities are pushing long-term yields higher, the temptation to demand certainty is strong. Kaplan’s advice is to resist that temptation. Use the time. Stay open. Avoid locking into a story before the facts finish arriving.
Markets will keep pricing the odds of a September move. Bitcoin and other risk assets will keep reacting to every data release. But the more durable question is whether the Fed can maintain the kind of flexible, data-dependent posture Kaplan is describing. So far the July decision looks consistent with that approach. Whether September ends the same way will depend on what the next few weeks of numbers actually say.
Looking ahead, the interplay between monetary policy and fiscal dynamics deserves more attention than it usually gets. Short-term rate decisions grab headlines. Longer-term yields often do the heavier lifting for households and businesses. Kaplan’s emphasis on that distinction is one of the more useful parts of his recent comments. It pushes the discussion past the usual binary of hike-or-hold and toward the structural forces that may keep borrowing costs elevated even if the Fed stays on hold for a while.
In the end, the July hold was never about declaring victory over inflation or signaling that the cycle was finished. It was about buying time to see which of the competing pressures would prove stronger. That still seems like a reasonable stance. The data between now and the next meeting will decide whether the same stance remains reasonable in September. Until then, the most honest posture is the one Kaplan keeps returning to: stay flexible, keep looking, and avoid the comfort of a premature conclusion.
Perhaps the most interesting aspect is how little the market moved after the July decision. Traders had largely expected the hold. The real test will come when the next set of inflation and employment numbers force a reassessment of those probabilities. Until that happens, the conversation stays open—and that, according to at least one experienced voice, is exactly where it should be.
