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Goldman: "The 2018 Inflation Rebound"

Summary:
A few brief excerpts from a note by Goldman Sachs economist Daan Struyven: The 2018 Inflation ReboundUsing our top-down and bottom-up core PCE models, we project that both macroeconomic fundamentals as well as sector-specific factors are likely to push core inflation meaningfully higher this year....We highlight three key drivers of the core PCE acceleration to 1.8% by end-2018 in our forecast: a 0.15pp boost from the pass-through from higher energy prices and a weaker dollar, a 0.1-0.15pp lift from a tighter labor market, and a 0.1pp jump from the Verizon effect dropping out....We ... now see the risks to our core PCE forecast of 1.8% by end-2018 as moderately tilted to the upside.emphasis addedCR Note: The central tendency for core inflation in the December FOMC projections was 1.7% to

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A few brief excerpts from a note by Goldman Sachs economist Daan Struyven: The 2018 Inflation Rebound
Using our top-down and bottom-up core PCE models, we project that both macroeconomic fundamentals as well as sector-specific factors are likely to push core inflation meaningfully higher this year.
...
We highlight three key drivers of the core PCE acceleration to 1.8% by end-2018 in our forecast: a 0.15pp boost from the pass-through from higher energy prices and a weaker dollar, a 0.1-0.15pp lift from a tighter labor market, and a 0.1pp jump from the Verizon effect dropping out.
...
We ... now see the risks to our core PCE forecast of 1.8% by end-2018 as moderately tilted to the upside.
emphasis added
CR Note: The central tendency for core inflation in the December FOMC projections was 1.7% to 1.9%. So this is in line with current FOMC projections, and still below the Fed target of 2%.
Bill McBride
A full time blogger, Mr. McBride retired as a senior executive from a small public company in the '90s. Mr. McBride holds an MBA from the University of California, Irvine, and has a background in management, finance and economics.

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