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Goldman Sachs Warns: US Inflation Decrease Not as Fast as Market Predicts

Contrary to market projections, the pace of US inflation fall may not be as swift, warns strategists at Goldman Sachs.

Goldman Sachs
Goldman Sachs

Goldman Sachs Doubts Quick Inflation Reduction

In contrast to the market's current projections, strategists at Goldman Sachs suggest that inflation in the United States won't drop at the anticipated speed. This viewpoint was communicated through a note that was quoted in a Bloomberg report last Saturday.

Markets Overly Optimistic About Inflation Cool-Down

Goldman strategists believe that markets are being overly positive about the rate at which inflation will decline. They wrote, "While we anticipate further falls in inflation, markets are significantly more optimistic about the cooling pace."

Ignoring the Threat of Delayed-Onset Inflation

The report further highlighted that markets are disregarding the potential for "delayed-onset inflation" particularly in sectors like healthcare. This could lead to inflated prices over a longer period than currently anticipated.

Limited Chances for Quick Inflation Control

Investors could be expecting that a drastic slowdown in US economic growth will result in a faster easing of price pressures. However, Goldman Sachs strategists believe that the chances of these factors effectively reducing inflation are limited.

Federal Reserve Maintains Interest Rates Amid Slower Inflation Decline

In response to the slower inflation decrease, the U.S. Federal Reserve kept interest rates steady this past Wednesday. However, new projections suggest that borrowing costs may still need to go up.

Investing Strategy Amid Rising Inflation

To investors who agree with their inflation viewpoint, Goldman Sachs strategists recommend buying one-year swaps to bet on higher inflation realization than what the current market is pricing.