Red-hot inflation in the United States may not cool off this year as much as many hoped, Goldman Sachs cautioned in a new report.
"The inflation picture has worsened this winter as we expected, and how much it will improve later this year is now in question," Goldman Sachs economists wrote in a client report Sunday night.Given that uncertainty, Goldman Sachs is raising its inflation outlook. It expects that core PCE inflation, the Federal Reserve's preferred price metric, will decelerate to 3.7% at the end of this year. That's a jump from Goldman's previous forecast of 3.
And inflation expectations could rise further from already"very high levels," Goldman added, if the Russian invasion of Ukraine causes energy prices to spike or disrupts supply chains. Why the Russian invasion will have huge economic consequences for American familiesEconomists closely watch inflation expectations because if businesses and consumers anticipate prices will keep rising, they will change their behavior and make it a self-fulfilling prophecy.
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