The Federal Reserve could take a break from fighting inflation if economists at Goldman Sachs prove correct in a surprising new forecast.
“In short, the impact of AI demand on inflation is significant but moderate, still largely comes from poor measurement, and is likely near its peak,” Goldman Sachs economists Rindels and David Mericle said Wednesday.
Economists estimate that AI pricing pressures are currently increasing core personal consumption expenditure (PCE) inflation by about 45 basis points, about half of which reflects real impact rather than mismeasurement. They expect this figure to peak at 50 basis points by the end of this year before falling back to 10 basis points by the end of 2027.
“We expect the impact to diminish next year, primarily because our industry analysts expect memory and computer prices to increase at a significantly slower pace, which should reduce both true cost pressures and the impact of measurement errors in the software and accessories category,” they added.
The Federal Reserve’s decision to raise interest rates in September came after sticky inflation statementspartly fueled by the AI boom and rising energy costsforced central bankers to return to tightening mode. This is the central bank’s first rate hike since July 2023.
And the institution may not be done for the year on the rate rise front.
“I have not changed my view that it may be appropriate to do another rate hike,” New York Fed President John Williams told Bloomberg on Tuesday. “I don’t think right now I have reason to believe we should do more. But you asked for 2027, we’ll have to see.”
Brian Sozzi is the editor-in-chief of Yahoo Finance, host of the Sozzi unleashed morning show, the ‘Powerful actors with Brian Sozzi podcast and member of the Yahoo Finance editorial leadership team. Follow Sozzi on @BrianSozzi, InstagramAnd LinkedIn. Any advice on stories? Email brian.sozzi@yahoofinance.com.
Click here for in-depth analysis of the latest stock market news and events that move stock prices.
Read the latest financial and business news from Yahoo Finance
Gn bussni
