28 BARRON’S July 12, 2021
Illustration byALEXANDRA COMPAIN-TISSIER
Q&A
An Interview With Robert Kaplan
President, Federal Reserve Bank of Dallas
Whythe
FedShould
EaseOff
A
small cadre of Federal Reserve officials is
pushing to start tightening monetary policy,
even if ever so slightly. Dallas Fed President
Robert Kaplan was the first to speak up pub-
licly.
Previously a professor at Harvard Busi-
ness School and a 23-year veteran of Gold-
man Sachs, Kaplan isn’t a voting member of the Federal
Open Market Committee (the central bank’s policy-set-
ting arm) this year, but he will be in 2023. Kaplan is wary
of rising inflation, which he views as more persistent
than do some of his colleagues, and he is warning of ex-
cessive risk-taking and the unintended consequences of
policy that is too loose for too long.
Kaplan is also a reminder that everything is relative:
He may be one of the most hawkish Fed officials, yet he
says it’s too soon to talk about raising interest rates. He
advocates gradual tapering and, on balance, sounds more
worried about economic growth beyond this year than
runaway inflation. Barron’s spoke with him about the di-
rection of the economy, monetary policy, and financial
markets. An edited version of the conversation follows.
Barron’s : Walk us through the much hotter-than-ex-
pected inflation data we’re seeing.
Robert Kaplan: Our estimate right now at the Dallas
Fed is that headline inflation, as measured by the per-
sonal consumption expenditure [PCE] index, will end
this year at 3.4%. That’s a highly elevated number, [but] if
you look ahead to 2022, that headline PCE reading will
moderate to something in the neighborhood of 2.4%.
That’s still well above the Fed’s longstanding 2%
target. Does this point to more persistent inflation?
Some of the price pressure will moderate as we work
through these labor supply/demand issues. Some of these
By LISA BEILFUSS