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Jun 11 - 09:55 AM

Goldman Sachs: What We Expect from May CPI Print and June FOMC Meeting?

By eFXdata  —  Jun 11 - 09:11 AM


Goldman Sachs provides insights into their expectations for the upcoming US May CPI print and June FOMC meeting. They forecast a softer increase in both core and headline CPI prices and anticipate the FOMC to signal fewer rate cuts for 2024 compared to previous projections.

Key Points:

  1. May CPI Forecast:

    • Core CPI: Expected to increase by 0.25% m/m, below the consensus of 0.3%.
    • Headline CPI: Anticipated to rise by 0.11% m/m, slightly above the consensus of 0.1%.
    • Factors Influencing Softer Forecast:
      • A 3% pullback in airfares.
      • Weaker prices observed in Adobe online data.
      • A further deceleration in car insurance prices to 1.0%.
      • A decline in new car prices by 0.3%, but a 1.1% rebound in used car prices.
      • Stable shelter costs, with rent expected at 0.35% and Owners' Equivalent Rent (OER) at 0.42%.
    • Residual seasonality in monthly inflation data implies a 2bp drag on core CPI in May.
  2. Core PCE Implications:

    • The CPI forecast aligns with a 19bp increase in core Personal Consumption Expenditures (PCE) in May.
  3. June FOMC Meeting Expectations:

    • Dot Plot Projections:
      • Two rate cuts in 2024, reducing the rate to 4.875% (vs. three cuts in March).
      • Four cuts in 2025, lowering the rate to 3.875% (vs. three cuts in March).
      • Three cuts in 2026, maintaining the rate at 3.125%.
      • A slight increase in the longer-run or neutral rate.
    • Leadership Preference:
      • Prefers a baseline of two cuts in 2024 to retain flexibility.
      • However, a one-cut baseline is a possible risk, especially if core CPI surprises to the upside.
  4. Future Rate Cuts:

    • First Cut: Expected in September, followed by quarterly rate cuts.
    • Terminal Rate: Anticipated to reach 3.25-3.5%, implying two cuts in 2024, four in 2025, and two in 2026.


Goldman Sachs anticipates a softer increase in CPI for May, which aligns with a modest rise in core PCE. At the June FOMC meeting, they expect projections to reflect fewer rate cuts in 2024, with a preference for retaining flexibility. Despite the possibility of an upside surprise in core CPI influencing the dot plot, Goldman Sachs maintains a forecast of initial rate cuts beginning in September, followed by gradual reductions through 2026.

Goldman Sachs Research/Market Commentary


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