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Goldman Sachs: Inflation Will Get Worse This Winter Before it Gets Better

The surge in commodity prices and supply chain constraints that have caused inflation in recent months will ease eventually.
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A Goldman Sachs analysis suggests that U.S. core personal consumption expenditures will halve by the end of 2022. 

The bank made that projection with an expectation that the surge in commodity prices and supply chain constraints that have caused inflation in recent months will ease eventually. 

Goldman Sachs expects the core PCE index to fall to 2.3% by the end of next year from 4.4% at the close of this year. The PCE index is the Federal Reserve's preferred measure for inflation. 

"The current inflation surge will get worse this winter before it gets better. We do expect persistent inflationary pressure from faster growth of wages and rents, but only enough to keep inflation moderately above 2%, in line with the Fed's goal under its new framework," said Jan Hatzuis, Goldman's chief economist, according to Reuters. 

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In the 12 months through September, the core PCE price index increased 3.6% for a fourth consecutive month. 

Last week, the U.S. dollar rose to a 16-month high, touching 95.197 as data showed inflation in the U.S. grew at its fastest pace since 1990. 

Read More: Inflation Catches Markets Off-Guard; Gold Finally Shines