What Trump’s policies could mean for the Fed

When people ask me about my job, I often say I have the best job at Goldman Sachs, and that's honestly no joke. And one of the things I love the most about my job is that it gives me the chance to speak to some of the most interesting and insightful people in business, economics, and finance. And today's guest certainly qualifies. Rob Kaplan ran the Dallas Fed from 2015 to 2021. Before that, he was a professor at Harvard Business School and the global co head of investment banking here at Goldman Sachs. Earlier this year, he rejoined Goldman Sachs as vice chairman. So I am proud to call him my

to be here with you, Allison.

The Fed is continuing its cutting cycle. As we all know, it brought down the Fed funds rate by another 25 basis points last week, and it continues to try to walk this tight rope of bringing down inflation without tanking the economy. We'll get your views on what could be ahead, but let me first ask how good of a job you think the Fed has done so far in orchestrating a soft landing.

It's done a good job in orchestrating the soft landing. Part of the thing that's helped them orchestrate that soft landing is that fiscal policy has been dramatically more accommodative, more stimulative than we're accustomed to. We've gone from pre COVID 70% of GDP to over a 100% of GDP debt of the US government. But people have to realize post COVID, 21, 22, and 23, we've had outsized fiscal spending, particularly these very large directed programs like the inflation reduction act and infrastructure act. That has helped the fed. Now on the other hand, it's caused the fed to go higher than th

But as of now, the economy is still growing even in this high rate environment. So would you judge it as generally a success?

For financial market people and more affluent people, it's been a success. For something like 65 or 70,000,000 workers in this country that go paycheck to paycheck, make probably 50, $55,000 a year or less, the cumulative rate of price increases matters more than whether we're having a soft landing right now and heading toward 2%. For them, they've lost 20, 25 percent purchasing power and their wages have not kept up, and they're struggling to make ends meet. And we saw that play out to some extent in this election this week. They probably would not give the Fed as high a grade. So I would say

Understood. You just mentioned, of course, the big event in the last week, which has been the reelection of Donald Trump. You ran the Dallas Fed during his first term. So let me first ask what that was like to be a sitting Fed official with Trump at the helm of our government.

But what you had to learn to do is be prepared to assess new fiscal policies, tax cuts, tariffs, and others, and try to incorporate them in your outlook. The one thing that does change though with administration and is political is supervision. And we had, I think, more constructive benign supervision during 16 to 20. We had more stepped up supervision after that. And so that was something we also had to adapt to.

So just to clarify, your term actually spanned into the Biden administration so you could tell the difference and supervision was stricter or more stringent in Biden versus Trump?