Synopsis:

Goldman Sachs expects US core PCE inflation for April to show subdued price growth, while the final May University of Michigan (UMich) inflation expectations are likely to ease slightly following positive sentiment from the US-China tariff deal.

Key Points:

• April Core PCE Forecast:
  Core PCE is projected to rise just 0.10% month-over-month, or 2.49% year-over-year, suggesting that inflation pressures remain well-contained.

• Tariff Effects Still Modest in April:
  Goldman estimates a 3 basis point boost to April core CPI from tariffs, but sees peak tariff impact on inflation hitting between May and August.

• UMich Inflation Expectations (Final May Print):

  • 1-year expectations had jumped to 7.3% in the preliminary release.

  • 5–10-year expectations rose to 4.6%.
    Goldman expects a small downward revision in the final print due to improved sentiment following the US-China trade détente.

Conclusion:

Goldman anticipates that core PCE inflation will remain soft, reinforcing the Fed’s current wait-and-see stance. Meanwhile, inflation expectations may retreat modestly, especially if optimism around global trade persists, easing pressure on the Fed to act quickly.