Bloomberg Audio Studios, Podcasts, radio News. Thanks so much for being with us, Rob.
First of all, I want to talk about your reaction to Kevin worsh as the next chairman of the FED. You know him, You've brought him to Dallas in the past. What do you think about this.
I think he'll be an excellent FED chair. He's got a lot on his plate, especially in the next number of weeks. He's got to get prepared for that first meeting and the press conference and the dot plot explanation. But I think he'll do a very good job. And he has a number of challenges in front of him, but I think he'll be an excellent FED cher.
You just pointed to that next meeting. What do you expect in terms of interest rates, especially when you're looking at inflation in the war.
Yes.
So the reasons I say it's challenging is if you roll back the clock, you know, eight weeks ago, I think the view was the next FED move would be a cut, just a question of how late you was it going to be because of oil prices being elevated and inflation readings being stickier. Now the view is and probably the conditions would warrant. The next FED move may actually be a raise, and they may do nothing this year.
And if they were going to do something, it would be more negative from a rate increase point of view, because they have to deal with inflation. So he's going to have to work through that and the meeting itself. He's got to get to know people after day around the table, he has to understand their views.
This is before the mid June meeting.
He's got to clean up the statement so it has more of a neutral bias rather than remember the three descents in the last meeting about the downward a bias.
He has to clean that up.
And there's a dot plot that comes out after this meeting, and the dot plot's going to show expectations for.
The rate path are firmer, not lower.
And so he's going to be responsible for explaining the dot plot in the press conference. So that's a lot to prepare for in the next three or four weeks.
As you very well know, you saw how President Trump was very public about Jerown Powell and his decisions.
President Trump saying.
Today and this really stuck out to me in the press conference, he's telling Kevin Warsh, I want you to be independent.
I want you to do your own thing. Is that even possible?
Yeah, I think it's not only possible, I think it's essential.
And I think Donald Trump, in his comments obviously is indicating that, and Kevin Warsh knows that, meaning he has to be seen not only in the room at the FOMC as is independent, but I think to the public for the Fed's moves to have credibility, I think he'll have to position himself as an independent arbiter who's trying to make the very best decisions to make sure we control inflation and we have full employment and so whatever public statements might have been made in leading up to
confirmation and up to now, I think he can wipe the slate clean on those and I think Kevin worsh will, and my advice to him would be he needs to not worry about any political constituencies at all, and I don't think he will. He has to worry about doing the job.
Former FED share Jerome Powell has decided to stay on as governor. You talked about the voices in the room.
How does the new FED chair handle that?
Well? I would guess j.
Powell's approach will be to be as quiet as humanly possible, given he's sitting around the table and he'll get a turn to speak, but I think he wants to fade into the background as much as he can allow the new FED chair to take over. He's staying for a very narrow reason, I believe, which is he's worried about the legal overhang, and I would hope that Japalell stay there, will the time frame will be minimized as little as possible,
but I think he won't. He'll try not to do anything that might impede the ability of Kevin worsh to step up and take control and do his job.
I'm curious.
I want to shift to Goldman Sachs before we let you go. I want to know what your clients are telling you right now about AI.
So we obviously know that inflation's been stickier, the ray curve is moving up. It's having some challenging effects on the economy low modern income consumers. But to your point, against all that, you've got a structural, historic, structural trend of not only AI infrastructure to build a compute, that's the eight hundred billion being spent this year, but AI adoption and what we're seeing is every business is having to work on use cases about how they can build
in AI adoption to improve their business. Here's how it's playing out in the US and the economic growth. Economic growth is solid but kind of sluggish. Corporate earnings grow on the other hand, is being revised upward, and I think we're going to see potentially a multi year trend where SMP earnings are improving at double digit rates, even
though GDP growth is a little bit sluggish. It's going to be more concentrated in smaller names, but many businesses are going to use AI to improve their margins and their business. And that's what we're hearing from clients.
Before I let you go, we're sitting here in Texas. You're going to have a large, large new office in Dallas, well on your way to more than five thousand employees here. What are you hearing from those that are deciding, Hey, we're going to move to Texas.
So at our firm, we've got already forty five hundred plus people here on our way to as you said, over five thousand.
That's part of a global firm.
That has forty five thousand plus or minus people globally. This will be a major presence, and one of the things we like about Texas is to growing state, magnet for people and firms here, pro business culture, access to talent, and one of the things that we're also seeing there's a very collaborative atmosphere between government, business, academia, nonprofits to where we have shared ownership, and I think that kind of mindset has been a magnet.
For people and firms to move here.
It's a very welcoming environment and pro business in a constructive way, and I think that's some of the various things that we like at Gold and Sacks and many of our clients like, which is why.
They're coming here.
Rob Kaplan, thanks so much for being with us.