20 November, 2021

Goldman Sachs Is Correct

Goldman Sachs Says Inflation Is Bigger Threat To Global Economy Than COVID-19 | The Daily Wire

Of course, part of the issue is that the China virus isn’t a major threat to most parts of our economy at all. Our reaction is the threat.

Higher-than-expected US inflation recently prompted us to pull forward our forecast for Fed liftoff by a full year to July 2022. We now expect core PCE inflation to remain above 3% — and core CPI inflation above 4% — when the QE taper concludes, which would make a seamless move from tapering to rate hikes the path of least resistance. After liftoff, we see a second hike in November 2022 and two hikes per year after that.

The key to this gradual pace is a partial moderation in goods prices and in overall inflation, driven by a combination of slowing demand and rising supply. On the demand side, we expect spending on goods to moderate as US government income support normalizes and service activity rebounds. Although US real goods consumption remains nearly 10% above trend, this already represents a decline of 5% since the peak in March when households received stimulus checks, and the adjustment likely has further to go.

They don’t see inflation dropping much any time soon. Well, that’s great news.

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