Goldman Sachs Says US Experiencing Disinflation if Not for Tariffs, Predicts Federal Reserve Cutting Rates Later This Year

Goldman Sachs vice chairman Robert Kaplan thinks the US economy would be in a deflationary situation right now if not for President Donald Trump’s wave of tariffs.

Kaplan, the former president of the Federal Reserve Bank of Dallas, tells CNBC in a new interview that recent inflation numbers suggest the possibility of rate cuts later this year.

“We’re in a disinflating world, and I think if it weren’t for these prospective tariffs that will flow through and are flowing through, I think the Fed would be on their front foot to be looking to cut rates now.”

Inflation rose by 2.4% in May, according to the Bureau of Labor Statistics. That was slightly less than the 2.5% increase predicted by economists.

Kaplan notes that the Fed will watch to see where the tariffs are set in the next several weeks and how they flow through the economy.

“I think if I were at the Fed, it would encourage me that, after we get over the horizon, maybe the tariff impact could be more muted than I fear.”

The Goldman vice chairman also comments on Fed Futures, which estimate the market-implied probability of changes to the Federal Reserve’s benchmark interest rate at upcoming Federal Open Market Committee (FOMC) meetings.

“Directionally, what I make of the Fed Futures is the first meeting where there’s a real meaningful probability of a cut is September.

So what I take from it, which I think is about right, is no action in June, unlikely in July.

The Fed, though, it will likely prepare itself and prepare in its comments that it might take action into the fall. But we still don’t know what the tariff rates are, and we still have a budget and tax bill that has not yet been passed, and we’ll see over the summer what the details of that are.”

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