Robert Kaplan Talks Fed Decision, Policy in 2026

Summary

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Bloomberg Talks

Episode: Robert Kaplan Talks Fed Decision, Policy in 2026
Date: December 11, 2025
Host: Bloomberg
Guest: Robert Kaplan (Goldman Sachs, former Dallas Fed President)

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Episode Overview

In this episode, Bloomberg hosts a candid discussion with Robert Kaplan, former president of the Dallas Fed and now with Goldman Sachs, diving into the recent Federal Reserve decision, the evolving impact of artificial intelligence (AI) on productivity, the dual mandate tension within the Fed, economic outlook for 2026, M&A activity, and private credit markets. Kaplan offers perspective on why policy debates are intensifying and what’s driving strategic corporate actions as the economy evolves.

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Key Discussion Points & Insights

The Early Days of AI and Its Economic Impact

• AI Infrastructure Versus Adoption:
  Kaplan emphasizes the current focus is largely on AI infrastructure, not yet on widespread business adoption.

  “We’re in the early stages of AI adoption. Most of the talk about AI right now is about the infrastructure build, but that's different than the downstream adoption. We're in the first or second inning.”
  (Robert Kaplan, 01:06)

• Productivity Potential:
  He forecasts meaningful gains in U.S. productivity over the next five years:

  “When we talk five years from now, we'll see a half a percentage point gain in productivity growth for GDP and it will help business... and which use cases work and which don't, we’re going to spend the next three years trying to figure that out.”
  (Robert Kaplan, 01:06)

• Crucial for Growth:
  With sluggish workforce and low immigration, AI-driven productivity becomes vital.

  “We don’t have much immigration at the moment. Bulk of our GDP growth's got to come from productivity growth. So AI is very important to the world and to the US and yeah, half a percentage point would be a big deal.”
  (Robert Kaplan, 02:00)

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Fed Decision and the Dual Mandate Debate

• Disagreement Inside the Fed Room:
  Kaplan notes more internal debate than the public might perceive about where rates should be.

  “I think in the room there was a lot more disagreement than it may have looked like. Only a couple of dissents, but we're at or near neutral.”
  (Robert Kaplan, 02:17)

• Fed's Balancing Act:
  He critiques the challenge of pursuing both employment and inflation targets, especially post-pandemic:

  “For a lot of the last 10 or 15 years... The Fed had the luxury exactly pre Covid of not having an inflation problem. So it could focus heavily on what was going on employment... post Covid... they got to deal with both and it's harder.”
  (Robert Kaplan, 03:31 & 03:37)

• Headwinds and 2026 Outlook:
  Cites tariffs, immigration policy, and the government shutdown as recent drag factors, but expects firming in 2026 with tax incentives and AI momentum.

  “Going into 26 we're in have tax incentives, we've got this AI boom continuing. And I think the... economy is likely to firm. And you saw that in the dot plot...”
  (Robert Kaplan, 04:17)

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Corporate Sentiment and M&A Activity

• Confidence for 2026:
  Corporate clients at Goldman Sachs are generally positive:

  “Most companies believe as we do that 26, you'll see firming GDP growth because of tax incentives and other reasons.”
  (Robert Kaplan, 05:16)

• M&A Drivers – The Scale Imperative:
  Kaplan identifies technological investment needs as the driver behind recent surge in M&A:

  “I've never seen a period in my business career where there wasn't a bigger concern about the need for size and scale to afford the technology investment and that's driving lot of merger activity.”
  (Robert Kaplan, 05:27)

• Transformation of Market Structure:
  While large-scale companies get bigger, AI is also empowering smaller players—but the competitive "middle" grows:

  “You'll have lots of very big huge scale companies that are dominant and you're going to have a lot in between. And I guess we had said in between has gotten a lot bigger in the last... companies that used to think they were big and dominant and still are less dominant.”
  (Robert Kaplan, 05:50)

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Strategies for "Old Industry" and Margin Pressure

• Necessity of Investment:
  Established firms must invest in tech and efficiency, but this squeezes short-term margins—hence belt-tightening.

  “Build size and scale and make more investment in efficiency, productivity, technology and so all that costs money and in the short run reduces margins. And that's why you also see a lot of belt tightening right now to offset some of the margin impact.”
  (Robert Kaplan, 06:27)

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Private Credit Markets

• Role and Risks:
  Kaplan sees private credit as a constructive addition to capital markets but highlights risk in sub-investment-grade lending:

  “Private credit... has been a good addition to bank lending… I'd be careful about that [less-than investment grade private credit].”
  (Robert Kaplan, 06:54 & 07:12)

• Caution About Credit Cycles:
  Warns that the lack of recent credit cycles could be lulling investors:

  “We haven’t had a credit cycle in many years. We’re not going to have one, I don’t think in 26... eventually... I’d be careful about that.”
  (Robert Kaplan, 07:12)

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Notable Quotes & Memorable Moments

• On AI’s Potential
  “If you got a half a percentage point jump in productivity growth, that’s a huge deal.”
  (Robert Kaplan, 01:49)

• On the Fed’s Dilemma
  “They have to make trade off decisions and that's hard to do.”
  (Robert Kaplan, 03:37)

• On Scale in Modern Business “Need for size and scale to afford the technology investment and that's driving lot of merger activity.”
  (Robert Kaplan, 05:27)

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Timestamps for Important Segments

• AI’s Stage and Productivity Forecast – 01:06
• Why AI Matters for U.S. Growth Now – 02:00
• Fed Decision: Internal Debate and Neutral Rate – 02:17
• Dual Mandate Tension, Post-Covid Dynamics – 03:31 – 04:17
• 2026 Economic Outlook & M&A Drivers – 05:16 – 05:27
• Transformation of Competition: Big, Small, Middle – 05:50
• Old Industry and Margin Pressures – 06:27
• Private Credit: Opportunities and Warnings – 06:54 – 07:12

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Summary

Robert Kaplan delivers a nuanced, forward-looking assessment of where both policy and corporate America are heading. He underscores the emerging, not-yet-certain impact of AI on productivity, the intensifying difficulty of achieving the Fed's dual mandate, and the growing imperatives for scale among major firms. While signaling optimism for 2026—supported by favorable policy and tech innovation—he also counsels caution regarding credit markets and the concentration of market power. This episode offers listeners a clear, high-level roadmap as the economy enters a new, more complex phase.

Transcript

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Audio Studios Podcasts Radio News Robert Kaplan.

[Bloomberg Host]

With us right now is affiliated with Goldman Sachs and of course his public service at the Dallas Fed. The this is great. I thought Austan Goolsbee's dissent yesterday was, was really something with his technology bent his work out at MIT at Chicago. Now I just, you know, my own individual opinion is Goolsbee something really worth watching here? Mark Wynne is out of Ireland in Rochester has a shingle out at the Dallas Fed. And of course Mark Wynn, under your student guidance years ago, has a spectacular, spectacular essay out on AI. And the summary of Mark Gwynne's work is we just don't know, do we?

[Robert Kaplan]

Well, I think we're in the early stages of AI adoption. Most of the talk about AI right now is about the infrastructure build, but that's different than the downstream adoption. We're in the first or second inning. I think my own view, and I think the view of my firm is when we talk five years from now, we'll see a half a percentage point gain in productivity growth for GDP and it will help business, but which use cases work and which don't. We're going to spend the next three years trying to figure that out.

[Bloomberg Co-Host/Interviewer]

Net net is it positive for the economy and how material? Because a lot of folks are hanging their hat on AI as really being a productivity enhancer to really impact the economy.

[Robert Kaplan]

If you got a half a percentage point jump in productivity growth, that's a huge deal. So we have sluggish workforce growth in the United States.

We don't have much immigration at the moment. Bulk of our GDP growth's got to come from productivity growth. So AI is very important to the world and to the US and yeah, half a percentage point would be a big deal.

[Bloomberg Co-Host/Interviewer]

What'd you take away yesterday from the Fed meeting here?

[Robert Kaplan]

Pretty straightforward. I think that I think in the room there was a lot more disagreement than it may have looked like. Only a couple of dissents, but we're at or near neutral. I think Jay Powell even said that it shows confirms that I think the neutral rate nominal is about three and a half, three and three quarters. And some of the folks say with inflation at 2 and 3 quarters and the job market likely to firm in the next year, we shouldn't be at neutral. And I think overall they bought insurance in case the labor market's weaker than they thought. But from here it will be a conventional Fed, meaning something's got to change to move the rate. Either unemployment needs to worsen or inflation.

[Bloomberg Host]

Needs to improve across the nation. Robert Kaplan with us of Goldman Sachs is former service at the Dallas Fed. As I said, we say good morning to Texas as well. So I look at yesterday's meeting and I look at all the what ifs that are out there and the bottom line is a dual mandate. And I kept hearing a back and forth on the dual mandate. What's the history that you studied of whether they focus on inflation or jobs? And don't tell me both because it's really hard to do that.

[Robert Kaplan]

Well, for a lot of the last 10 or 15 years.

The Fed had the luxury exactly pre Covid of not having an inflation problem. So it could focus heavily on what was going on employment and, and have thought employment was weakening. It could move post Covid and I would argue with this boom in government spending we had in 2021, 22 and 23 and that which probably cost supply chain dynamics to create an excess demand issue, they got to deal with both and it's harder to deal with both. And so then they have to make trade off decisions and that's hard to do.

And.

Having said that, I think they've done a reasonable balancing job. But that's the reason for the division in the group. It's not that they prioritize one over the other. I think the fact is we've had three headwinds, one in the short run. Tariffs are slowing growth, the immigration policy has slowed growth and the shutdown, as you would expect, is slowed growth. But the shutdown is reversing and going into 26 we're in have tax incentives, we've got this AI boom continuing. And I think the light the economy is likely to firm. And you saw that in the dot plot and people are saying, you know, the labor weakness is going to firm, let's do nothing. And that's the reason for the debate.

[Bloomberg Co-Host/Interviewer]

Interesting. When you talk to your corporate clients at Goldman Sachs, what is their view for 2026? We're seeing, I kind of look at M and A as a barometer of how confident the C suite is and the board is. And we're seeing a big M and a trade going crazy out there with Warner Brothers Discovery. When you talk to your corporate clients, are they confident about their ability in 2026 to maybe grow?

[Robert Kaplan]

I think most companies believe as we do that 26, you'll see firming GDP growth because of tax incentives and other reasons. However.

I've never seen a period in my business career where there wasn't a bigger concern about the need for size and scale to afford the technology investment and that's driving lot of merger activity.

[Bloomberg Host]

We can cover this a number of times this week as well. So then do we head towards a monopsonistic America? Do we have a capitalism that is essentially a big roll up to get to capex scale?

[Robert Kaplan]

I think you're going to have lots of still small emerging businesses powered by AI that can grow and will be very attractive and they'll get to a point where they kind of stabilize. You'll have lots of very big huge scale companies that are dominant and you're going to have a lot in between. And I guess we had said in between has gotten a lot bigger in the last companies that used to think they were big and dominant and still are less dominant.

[Bloomberg Host]

I looked at Procter and Gamble carefully. So I don't want you to comment on individual security but what does old industry do in their in between this.

[Robert Kaplan]

Build size and scale and make more investment in efficiency, productivity, technology and so all that costs money and in the short run reduces margins. And that's why you also see a lot of belt tightening right now to offset some of the margin impact.

[Bloomberg Co-Host/Interviewer]

One of the newer developments capital markets wise over the last 15 years has been private credit. What's your view there?

[Robert Kaplan]

I mean we tend to view it as a continued private credit I'd say has been a good addition. It's been a good addition to bank lending.

The only comment I would make on the other hand is investment grade.

Credit spreads are very tight but it's investment grade. I think the watch out is the less than investment grade side of private credit. We haven't had a credit cycle in many years. We're not going to have one. I don't think in 26 we'll have one eventually. And so there's a lot of money flowing in to less than investment grade private credit. I'd be, I'd be careful about that.

[Bloomberg Host]

Robert Kaplan, thank you so much. Greatly, greatly appreciated. Of course the former president Dallas Fed and with Goldman Sachs now and of course an affiliation with Harvard over the years.

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