Goldman Sachs Group Inc Vice Chairman Robert Kaplan stated that the Federal Reserve's decision to keep interest rates unchanged in July was "absolutely" the right move, and he urged policymakers to remain open-minded ahead of the September meeting. He noted that the current economic landscape is a complex interplay of inflation and deflationary pressures, creating a "countercurrent" that makes rigid forward guidance counterproductive.

"If I see meaningful improvement, I might lean toward continuing to 'kick the can' and hold steady," Kaplan said in an interview on Thursday. "But I want to use every minute before September to make a judgment, avoiding being rigid or coming to a preset conclusion."

Kaplan's perspective is rooted in his Wall Street experience (as vice chairman of Goldman Sachs) and his previous role as president of the Federal Reserve Bank of Dallas. He observed that current drivers of inflation include price pressures from artificial intelligence infrastructure buildouts, along with tariffs, labor constraints, and surging oil prices, which further exacerbate the situation. At the same time, the widespread application of AI and China's industrial overcapacity are pushing in the opposite direction, reinforcing deflationary trends.

"Without the Iran war and the surge in oil prices—which I believe has already pushed up overall inflation and spilled over into other items—I suspect we might not even be talking about the possibility of rate hikes," Kaplan said. Thursday's Producer Price Index (PPI) report showed U.S. wholesale inflation was slowing, providing additional support for his view.

Kaplan suggested that Fed Chair Kevin Warsh should use his speech at the Jackson Hole Global Central Banking Symposium this month to briefly explain the logic behind the July hold, rather than delivering a purely "philosophical" address. He pointed out that the Fed has a history of overusing forward guidance, a critique that aligns with Warsh's earlier concerns.

Kaplan is more concerned about long-term Treasury yields than the federal funds rate itself. He said the rise in global long-term bond yields reflects structural supply-demand imbalances, driven by persistently large fiscal deficits rather than Fed policy. "In a robust economy, you would typically expect deficits to narrow," he said. "But these deficits are not narrowing."

Traders are signaling unease about this trajectory by downplaying the Fed's signals of holding steady. A $25 billion auction of 30-year Treasury bonds on Thursday is expected to yield the highest level since 2001.