Goldman Sachs warns that inflationary pressures are spreading across the US, with Fed Chair Walsh facing mounting pressure to raise interest rates.

Goldman Sachs’ latest research report shows that U.S. inflationary pressure is spreading from a narrow set of sectors to a broader range of areas. While current inflation levels have not yet hit their 2022 peak, the expanding scope of price increases is posing greater challenges to the Federal Reserve’s policy efforts. Goldman Sachs economist Jessica Rindels analyzed the extent of inflation spread using the six-month annualized change rate of the Personal Consumption Expenditures (PCE) price index, a key metric closely watched by the Fed. The data shows that, compared to the average inflation level between 1990 and 2019, the pressure index for inflation categories exceeding 3% has reached around 6, while it stood at 10 during the 2022 inflation peak. The report points out that sectors such as audio-visual equipment, financial services, healthcare, and transportation have become key drivers of current price increases. Meanwhile, housing rent inflation, which carries a significant weight in the PCE index, is projected to fall below 3% in the fourth quarter of this year, potentially serving as a key factor easing inflationary pressure. Goldman Sachs’ analysis aligns with recent concerns from new Fed Chair Kevin Warsh about the "broadening of inflation". Warsh stated that preventing price hikes from spreading to more sectors of the economy is a key task for the Federal Reserve. However, unlike former Chair Jerome Powell’s relatively clear policy communication style, Warsh has so far refused to provide specific interest rate path guidance. Jeremy Schwartz, senior U.S. economist at Nomura Securities, noted that the Fed is reducing forward guidance to the market, and this policy uncertainty has heightened concerns on Wall Street. Meanwhile, hawkish voices within the Fed are growing. Dallas Fed President Lorie Logan has expressed support for moderate interest rate hikes, arguing that the current economic resilience is inconsistent with inflation risks.