Goldman Sachs says the latest round of U.S. tariffs is adding notable stickiness to inflation, warning that the cumulative impact could keep core PCE inflation around 3.0% year-on-year by December 2025, well above the Federal Reserve’s 2% target.
In its updated forecast, Goldman estimates that tariffs already implemented this year have raised core PCE prices by 0.44 percentage points, while new and proposed duties are expected to add another 0.6 percentage points over the coming year. The combined effect would slow the pace of disinflation and complicate the Fed’s policy outlook.
The bank said much of the inflation impulse reflects firms passing through higher import costs in goods categories exposed to China and Europe. Although broader domestic inflation pressures are easing—helped by cooling labour markets and stabilising shelter costs—trade policy is now acting as a countervailing force.
Goldman’s economists noted that without these tariff effects, core PCE would likely be closer to the mid-2% range, suggesting that trade tensions, rather than overheating demand, are behind the persistence of price growth heading into 2026.
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Goldman’s forecast suggests inflation could stay above target longer than markets expect, challenging hopes for faster Fed easing. Sticky core PCE readings driven by tariffs may reinforce caution among policymakers and weigh on Treasuries and rate-cut bets.
