FX.co ★ Goldman Sachs: inflation expectations remain elevated in US

Inflation expectations in the US remain high despite five years of sustained price growth above the official target level. According to a new report from Goldman Sachs, the Federal Reserve's concerns about an irreversible shift in consumer and business psychology are greatly exaggerated.

Analyst Abhay Dougelira points out that the current inflation surge was preceded by a whole decade when the annual CPI rate had settled below the 2% mark. This prolonged period created a solid psychological buffer that prevents long-term inflation expectations from becoming unanchored. Experts believe that the public's perceptions of a future dynamic are shaped by personal experiences and shopping habits rather than influenced by the central bank's press conferences. During normal periods, society pays little attention to the regulator's rhetoric, making official statements a weak tool without an actual decline in the cost of living.

Maintaining stable expectations is critically important for the economy, as this factor prevents businesses from uncontrollably increasing prices and employees from demanding significant wage hikes. Disturbing data from the University of Michigan's surveys, which recorded a rise in long-term expectations to 3.3%, is attributed by Goldman Sachs to changes in calculation methodology and the political polarization of American society. At the same time, statistics from the Federal Reserve Bank of New York confirm that recent inflation has only raised the expectations of younger people to the levels of older generations who dealt with historical inflation shocks.

Goldman Sachs' special academic model shows that the overall sensitivity of the population to inflation is currently only minimally higher than the hypothetical scenario in which prices would have consistently risen by 2% since 2009. The bank predicts that inflation in the US will fully return to the Fed's target level by the end of 2027 amid stabilizing oil prices and the waning effects of new trade tariffs.