Despite a cooler-than-expected Consumer Price Index (CPI) reading, Goldman Sachs anticipates that the Federal Reserve's preferred inflation measure—the core Personal Consumption Expenditures (PCE) index—likely rose by 0.2% in May, up from 0.1% in April. This increase would elevate the year-over-year core PCE rate to 2.6% from 2.5% .
The projected rise is attributed to the recent implementation of tariffs by the Trump administration, which Goldman Sachs economists believe will exert upward pressure on inflation. They forecast that core PCE inflation could reach 3.5% by the end of 2025, primarily due to these tariff effects .
While the immediate impact of tariffs is expected to be a one-time price level adjustment, Goldman Sachs cautions that the full effects may become more pronounced in the coming months. The firm suggests that the inflationary impact of tariffs could peak between May and August before gradually dissipating .
Meanwhile, this from the Wall Street Journal on analysts' adjusting their expectations re Federal Open Market Committee (FOMC) rate cuts this year:
The latest inflation reading was released on Wednesday:
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