Goldman Sachs' Hatzius Forecasts Benign July US CPI and Downgraded Jobs Trend
Vexoda Newsroom
Goldman Sachs chief economist Jan Hatzius expects a mild July US CPI reading, potentially easing Fed rate hike pressure. He also downgrades the jobs trend to just 5,000 per month.
In an exclusive interview with Fox Business, Goldman Sachs' chief economist and head of global investment research, Jan Hatzius, predicted a relatively mild July Consumer Price Index (CPI) report. His forecast suggests a headline print around 0.05% month over month and core near 0.19%, aligning or slightly below market expectations.
Hatzius attributes the initial surge in inflation to temporary factors such as tariff pass-through, higher oil prices, and World Cup-related effects, which he believes are now diminishing. He also highlighted a significant downward revision of Goldman Sachs' underlying job creation trend from around 75,000 per month to just 5,000.
The conversation touched on the Federal Reserve's preferred inflation measure, with Hatzius suggesting that while Fed Chair Kevin Warsh has hinted at potential changes, he does not expect a shift away from core Personal Consumption Expenditures (PCE) as the primary gauge. He emphasized that even if there is no change in metrics, 2% remains the central target for inflation.
Hatzius further argued that underlying downward forces such as cooling rent and wage inflation make rate hikes unnecessary this year, although he acknowledged a hike could still occur given current conditions. The strong performance of the US economy, with expected GDP growth of 2-2.5%, is seen as consistent with its long-term sustainable trend.
The downgraded jobs forecast underscores how quickly the labor market has deteriorated beneath noisy monthly headlines. This shift in expectations may ease pressure on the Fed heading into September's rate decision, potentially allowing for a more measured approach to policy adjustments.
Traders should watch upcoming CPI data closely as it could influence broader market sentiment and Federal Reserve actions. The continued downward trend in inflationary pressures and job creation trends will be key indicators moving forward.
Source: InvestingLive. Summarized and rewritten by the Vexoda Newsroom. This is market news, not financial advice.