As the U.S. economy faces a stagflationary shock, how will the Fed navigate this tricky environment?

I'm Alison Nathan, and this is Goldman Sachs exchanges.

My guest today is Rob Kaplan, the vice chairman of Goldman Sachs, and the former president of the Dallas Fed.

Rob, welcome back to the program.

Good to see, Allison.

So, Rob, there is so much to talk about today. But of course,

there is a lot of concern that the U.S. is headed for a stagflation shock, which is notoriously

difficult for monetary policymakers to deal with. So first of all, let's just get your view. Do you

think that we are facing stagnation ahead?

We are facing most likely slower growth and stickier prices, so I guess that might be

the definition of stackflation. And there's several reasons why not just tariffs. We're right

now in the middle of an effort to cut government spending and lower deficits.

So it's a question mark how effective it's going, but that would normally slow growth.

You've got a regulatory review in every industry that should help growth, but it might take

a year or two.

You've got immigration flows due to deportations.

Immigration and flow of workforce is decelerating, is declining.

Workforce growth helps growth.

We're accustomed to 1 to 2 million workers per year over the last eight years,

including in the first Trump administration.

It looks like it could be in the low hundreds of thousands this year. That makes growth lower, makes the job force in the service sector stickier. And then

you've got tariffs, which should slow growth and provide a cost shock, but we don't know how

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