Kaplan Says Fed Right Not to Raise Rates in July

• Economy shows strength in AI infrastructure and adoption, but weakness in housing, autos, and low/moderate-income consumer spending.
• Job market is 'okay, not great' with stable hiring/firing, and unit labor costs are well-behaved, leading to increasing profit share of GDP and muted labor share.
• Kaplan suggests the Fed made the 'absolutely right decision' not to raise rates in July and should avoid being rigid, noting that without the oil price spike (possibly related to Iran/Middle East tensions), a September hike might not be on the table.
• Identifies AI infrastructure build, tariffs, labor constraints, and oil spikes as inflationary, while AI adoption and Chinese overcapacity are disinflationary.

Robert Kaplan, former Dallas Fed President and current Goldman Sachs Vice Chairman, assesses the economy as mixed, with strong AI-related growth contrasting with sluggishness in other sectors. He believes the Fed was right not to raise rates in July and should remain flexible, suggesting that without the oil price spike linked to Middle East tensions, further rate hikes might not even be considered. He highlights both inflationary and disinflationary forces at play.