Goldman Sachs’ Chief US Economist Says Tariffs Unlikely To Spark a Prolonged Inflation Period, Predicts Three Rate Cuts This Year

David Mericle, chief US economist at Goldman Sachs, says that President Trump’s tariffs are unlikely to result in a lengthy period of inflation.

In a new interview with CNBC Television, Mericle says he expects the Fed to make three rate cuts this year, starting in two months, as he predicts tariff-driven inflation will be transitory.

“I think the latest batch of data suggests that the stakes are not hugely high at the moment, that the economy, the labor market at least, doesn’t seem to be in need of great rate cuts. But the inflation data, from my perspective, suggests that we’re doing just fine, and that the underlying trend is moving back towards something closer to 2% – even if tariff effects are and are likely to continue to give us a little bit of a boost on top of that.

We still have three cuts penciled in for later this year. I think they could start in September, because I’m relaxed about the inflation news. I think we are moving in the right direction for reasons many economists anticipated; supply and demand, especially in the labor market, are back in balance. We’re seeing the end of catch-up inflation, and I’m not worried about tariffs unanchoring inflation expectations, but I do think you are seeing those effects show up from month to month.”

Mericle also says that one reason why tariff impacts will be short-lived is that the economic conditions, particularly in the labor market, are much different from what they were about three years ago when inflation soared.

“The actual boost to inflation, especially against a backdrop where the economy is not nearly facing the same degree of labor market tightness as it did back when we all worried about this in 2022, probably means that the tariff effects are not going to spark a long, prolonged period of high inflation.”

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