Goldman Sachs(US:GS) Hua Er Jie Jian Wen·2026-02-26 10:36Core Insights - Goldman Sachs reports a potential turning point in U.S. core goods inflation, with tariff cost transmission effects diminishing, leading to an overall downward trend in inflation expected to continue towards target levels by 2026 [1][8] - The report estimates that the transmission of tariff costs to consumer prices has reached 62% after ten months of implementation, predicting core goods inflation to drop significantly from 1.97% in December 2025 to 0.08% in December 2026 [1][3] Current Inflation Trends - Inflation pressures are easing but remain above the Federal Reserve's 2% target, with the core PCE price index rising to 3.00% year-on-year in December 2025, down from a peak of 5.61% [2] - The core CPI decreased to 2.51% year-on-year in January, significantly lower than its historical peak of 6.62% [2] Tariff Impact on Inflation - The report emphasizes that the impact of tariffs on goods prices has largely been realized, which will be a key driver for declining inflation [3] - Tariffs currently contribute approximately 0.7 percentage points to core PCE year-on-year inflation, expected to reduce to only 0.1 percentage points by the end of 2026 [3] Service Sector Inflation - Core service inflation is declining at a slower pace, which is a major factor hindering a rapid return to overall inflation targets [4] - The core service PCE price index, excluding housing, showed a year-on-year increase of 3.3% in December, still above pre-pandemic levels [4] Housing Inflation Trends - Rental growth for new leases is slowing, with January showing only a 0.2% year-on-year increase, down from 0.5% in December [5] - This trend is expected to continue impacting official CPI rental data, leading to a gradual reduction in housing inflation contributions by 2026 [5] Labor Market Dynamics - The labor market is cooling, supporting the downward trend in inflation, with wage growth expectations declining [6] - The Goldman Sachs wage tracker indicated a year-on-year increase of 3.5% in Q4, with expectations further dropping to 3.2% in January [6] Inflation Expectations - Recent surveys indicate a marginal improvement in inflation expectations among residents and markets, reinforcing the credibility of the inflation decline [7] - One-year inflation expectations fell to 3.4% in February, while five to ten-year expectations remained stable at around 3.3% [7] Future Inflation Projections - Goldman Sachs predicts core PCE inflation to decrease from 3.0% in December 2025 to 2.2% by December 2026, with core CPI expected to drop to 2.1% [8] - The significant decline in core goods inflation and moderate decrease in housing inflation are expected to create more room for overall inflation to align with targets [8]