© Reuters. Goldman Sachs: U.S. Inflation Will Cool But Market Expectations Are Too Optimistic!
News from the Financial Associated Press, June 18 (edited by Zhou Ziyi)In a new report, Goldman Sachs pointed out that US inflation will not fall as quickly as the market is currently expecting.
Goldman Sachs strategists Praveen Korapaty and others wrote in a report on Friday (June 16), “While we also expect inflation to fall further ahead, the market seems to be much more optimistic about the pace of inflation cooling than we are.”
At present, most investors believe that the sharp deceleration of US economic growth will lead to faster relief of price pressures, and tend to think that energy prices will fall even lower. But Goldman Sachs noted that these factors have limited potential to reduce inflation.
Strategists such as Korapaty see limited downside for energy prices, and the market is also ignoring potential “delayed inflation” in sectors such as health care.
At the same time, Goldman Sachs also recommends that investors who share their views on inflation buy one-year swaps, betting that inflation will be higher than the current market price.
On Wednesday (June 14), the Federal Reserve kept interest rates unchanged as expected, but the dot plot still showed two more rate hikes this year and hinted in new forecasts that borrowing costs may be lower as the decline in inflation slows. Still need to go up.
The Federal Open Market Committee (FOMC) statement pointed out that further interest rate hikes should take into account the lag effect of monetary policy on economic activity and inflation, as well as the impact of tightening policy on economic and financial stability.
In addition, Tom Lee, Fundstrat’s director of research, said in a note Friday that price growth may slow, possibly this year, or at a time when the housing or rent subdivisions of the consumer price index (CPI) decline. .
He added that the stock market is starting to buy into that view, which could also be a major reason for the year-to-date gains.
“The Fed can end the war on inflation when there is widespread public belief that inflation has broken,” Lee noted, and his best guess is “sometime in 2023.”