Former Dallas Fed president Robert Kaplan said the bond market has been too
Aggressive in pricing Fed rate hikes. He called a September hike the right
decision, said a December hike could be reasonable, but suggested pausing in
October may be appropriate. Kaplan described inflation as concerning on both
monthly and annual measures and said monthly inflation annualized is close to
3%. He noted the Fed dot plot implies one more hike this year, while markets had
priced at least three additional hikes through next June as of Thursday morning.
Kaplan added that AI infrastructure and defense spending are strong, whereas
autos, housing-related firms and businesses serving low- and middle-income
consumers are weak or sluggish, and sectors most sensitive to the federal funds
rate are not overheating.
