A sharp rebound in inflation tied to Donald Trump’s enacted trade tariffs could soon jolt markets, but Goldman Sachs believes this surge will be short-lived, driven by one-off price increases rather than deeper economic overheating.
In a Tuesday note, the bank’s U.S. economist David Mericle said core personal consumption expenditures (PCE) inflation—the Federal Reserve’s preferred gauge—will likely rise to 3.6% by the end of 2025.
That’s a notable climb from April’s reading of 2.8%, yet Goldman doesn’t expect the jump to signal a return to the entrenched inflationary conditions of 2021-2022.
Why This Inflation Shock Is Different
Unlike the pandemic-era inflation, which was powered by demand surges, tight labor markets and massive fiscal transfers, the current shock stems from a one-time shift in relative prices due to tariffs.
“We expect tariffs to provide a one-time price level boost,” Mericle said, forecasting a roughly 2% rise in consumer prices over 18 months.
Goldman estimates that that …