Goldman Sachs says Trump tariff escalation will delay inflation falling to target

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Goldman Sachs says Trump tariff escalation will delay inflation falling to target

Goldman Sachs published their outlook for inflation in 2025, titling it with the choice that will be made:

• "Tariffs or 2%"

GS says the current level of PCE inflation, 2.7% y/y, "has returned most of the way back to the 2% target", and that the

• muchh of the gap from 2.7 down to 2 "appears to reflect consumer prices catching up to input costs or market rates that rose sharply in the early pandemic years but have since slowed"

and that

• most of thesee categories should return to pre-pandemic levels of inflation as the gap between costs and prices closes fully

The but is:

• "we expect an escalation in tariff policy to delay the return to 2.0%."

Bummer.

The subheading to this post is me wondering what inflation higher than 2% will mean for the FOMC. If the prospect of falling to target is delayed, then it seems further cuts will be delayed too. Fed officials are already making noise about slowing/stopping cuts.

I know, right?

                This article was written by Eamonn Sheridan at www.forexlive.com.

Source: Goldman Sachs says Trump tariff escalation will delay inflation falling to target

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