On September 23, a week after the Federal Reserve raised interest rates to 3.75%-4.00% (its first hike since 2023, decided under Chair Kevin Warsh), Rob Kaplan, vice chairman of Goldman Sachs, said something that sounded almost contrarian at the time: markets were pricing in more rate hikes than the Fed would actually deliver.

Weak U.S. jobs data for September, released on Monday, October 5, together with a collapse in bets on another hike in October, now seem to point exactly in the direction Kaplan indicated.

Kaplan is not an ordinary commentator. He was president of the Federal Reserve Bank of Dallas from 2015 to 2021, with a vote on the Federal Open Market Committee (FOMC), the panel that sets U.S. interest rates, before returning to Goldman Sachs, where he had already worked for more than twenty years, rising to president and head of operations. He is one of the few voices on Wall Street who combines first-hand experience inside monetary policymaking with the market reading typical of a major investment bank. His remarks came in the bank’s official podcast, “Goldman Sachs Exchanges,” published on September 23, 2026 under the title “Why Markets May Be Pricing in Too Many Fed Rate Hikes” and available in full on the Goldman Sachs website.

A “low-fire, low-hire” labor market

In the podcast, Kaplan said his baseline forecast remained one more hike, in December, which would take the Fed’s policy rate to the 4%-4.25% range, followed by a pause. “I think the market does expect more hikes than I currently think are likely,” he said.

The core of his analysis, however, was the state of the U.S. labor market, which he described with a phrase that quickly caught on in Wall Street circles: “I think we’re facing a low-fire, low-hire labor market.” In other words, companies are not laying off workers en masse, but they are not hiring either: a fragile balance, not real strength.

According to Kaplan, there is no single factor behind the weakness but a sum of supply shocks unprecedented in the economics textbooks: “Tariffs are a supply shock, and so are weak labor force growth and the immigration crackdown, which is another supply shock,” he said, adding higher energy prices and the boom in artificial intelligence investment. In his view, that combination forces the Fed to move with caution, to keep energy-driven inflation from spreading to the rest of prices, without having to overdo new hikes.

Today’s data seem to speed up Kaplan’s scenario

The September nonfarm payrolls report, released Monday morning U.S. time, showed only 29,000 new jobs against the 84,000-90,000 expected by analysts. The unemployment rate rose to 4.2% from 4.1% previously. The figures describe exactly the “low-fire, low-hire” market Kaplan talked about, but are even weaker than he had predicted just two weeks earlier.

The market reaction was immediate. According to futures tracked by FXStreet, the implied probability of a Fed pause at the October 27-28 meeting rose to 82.3% from just 35.8% a few days earlier. (This figure comes from a single market source and has not been cross-checked against the CME FedWatch tool.) In other words, if in late September Kaplan believed markets were pricing in more hikes than the Fed would deliver, markets have now gone beyond his own forecast of a final hike in December and have begun to price in the possibility that the Fed will not move rates even in October.

That is a logical extension of Kaplan’s reasoning, not a direct comment by him on the latest data: the Goldman Sachs vice chairman has not yet spoken publicly about the September report.

Why it matters beyond the United States

The path of U.S. interest rates is not an abstract issue for investors outside the U.S. It affects the euro-dollar exchange rate, and therefore the euro value of unhedged U.S. stocks, bonds and ETFs held by European investors. It influences Treasury yields, which have hit multiyear highs in recent months and dragged European sovereign yields higher with them, including the spread between Italy’s BTPs and Germany’s Bunds (the benchmark gap in borrowing costs between the two countries). And it guides the European Central Bank (ECB), which looks to the Fed as it calibrates its own response to the ongoing energy shock.

For the Fed, a pause arriving sooner than the market expected until a few days ago could ease pressure on the dollar and on global yields. But as Kaplan himself observed, the underlying causes (tariffs, immigration, energy and the AI capex boom) remain unresolved, and they will determine whether the pause is an endpoint or only a temporary interruption.

Editor’s note

This article was originally published in Italian on money.it by Ufficio Studi Money.it on October 06, 2026 as «Kaplan (Goldman Sachs): «Il mercato prezza più rialzi Fed di quanti ne siano giustificati». E i dati sembrano dargli ragione». It has been translated and adapted for an international audience by the Money.it International desk.