Goldman's Hatzius Sees Benign July CPI Reading, Cuts Job Creation Forecast

Goldman Sachs chief economist Jan Hatzius expects the US Consumer Price Index (CPI) reading for July to be similar to June's, which was a benign print. He forecasts around 0.05% month-on-month on the headline index and 0.19% on core.

This would sit in line with or slightly below consensus expectations and reinforce the softer trend that began in June. If it holds, this could ease pressure on the Federal Reserve heading into September.

Hatzius attributed the first five months of 2026's worse-than-expected inflation to temporary drivers, including tariff pass-through, the impact of higher oil prices, particularly on the headline index, and a World Cup related effect. He said these factors are now fading.

Regarding the potential shift in how the Fed measures success, Hatzius said he did not interpret Fed Chair Kevin Warsh's comments as confirming a firm switch away from core Personal Consumption Expenditures (PCE) inflation. Instead, he expects PCE to remain the Fed's central focus even heading into 2027 and beyond.

Goldman Sachs has sharply cut its estimate of the underlying monthly job creation trend to around 5,000 from roughly 75,000 previously, following July's weak labour market data. Hatzius said this figure is derived by averaging payroll numbers over the past three months and household survey employment data over the past nine months.

When asked how the US economy is performing, Hatzius described it as 'doing pretty well', citing expected GDP growth of 2% to 2.5% over the next one to two years and a low and stable unemployment rate. He acknowledged that inflation remains the standout problem after five years of excessive price growth.