Goldman Sachs warns that US inflationary pressure is spreading, and Federal Reserve Chairman Walsh is under pressure to raise interest rates

Comparing news, Goldman Sachs's latest research report shows that US inflationary pressure is spreading from a few industries to a wider range of sectors. Although the current level of inflation has not reached its peak in 2022, the coverage of price increases is expanding, making the Federal Reserve's policy face greater challenges.

Goldman Sachs economist Jessica Rindels analyzes the extent of the spread of inflation through a six-month annualized rate of change based on the personal consumption expenditure (PCE) price index that the Federal Reserve focuses on. According to the data, compared to the average level of inflation from 1990 to 2019, more than 3% of the inflation-category pressure index has now reached a level of about 6, while at the peak of inflation in 2022, the index was 10.

The report points out that fields such as audio-visual equipment, financial services, healthcare, and transportation have become important sources of current price increases. Meanwhile, housing rent inflation, which is heavily weighted by PCE, is expected to fall below 3% in the fourth quarter of this year, which may be an important factor in easing inflationary pressure.

Goldman Sachs's analysis echoes recent concerns about the spread of inflation by new Federal Reserve Chairman Kevin Warsh. Warsh said that preventing price increases from spreading to more sectors of the economy is an important task for the Federal Reserve.

However, unlike former Chairman Powell's more explicit policy communication method, Warsh currently declined to provide specific interest rate path guidance. Jeremy Schwartz, senior US economist at Nomura Securities, said that the Federal Reserve is reducing its forward-looking guidance to the market, and this policy uncertainty has increased Wall Street concerns.

Meanwhile, hawkish voices within the Federal Reserve are heating up. Dallas Federal Reserve Chairman Logan has expressed support for a moderate rate hike, believing that the current economic resilience does not match the risk of inflation.