Inflation is broadening out, says Goldman economist

By Jules Rimmer

Price rises are higher than 1990-2019 but nowhere near the 2022 inflation crisis

WASHINGTON, DC - JULY 14: Federal Reserve Chairman Kevin Warsh testifies before the House Financial Services Committee on Capitol Hill on July 14, 2026 in Washington, DC. Warsh, President Trump's pick to lead the Federal Reserve, presented the Semi-Annual Monetary Policy Report to the committee. (Photo by Eric Lee/Getty Images)

During his Congressional testimony last week, new Fed Chair Kevin Warsh emphasized that one of his primary responsibilities was to ensure that individual price spikes, of which there have been many in recent years, "don't broaden out."

The bad news is that on the whole they are. The good news is that they are nowhere near as bad as the inflation crisis of 2022.

One Goldman Sachs economist examined the risk of those price spikes becoming normalized. Jessica Rindels published a report examining whether inflationary trends are widening across sectors.

She calculated the numbers using a few key filters: first, she used personal consumption expenditure, the Fed's stated preferred measure of inflation.

Then she aggregated them over the six-month annualized change. And finally, she categorized either by their weights in the PCE or by treating each category individually.

Rindels discovered that on a scale of 0-10 (where the 1990-2019 average was zero and peak inflation in 2022 was 10), the share of categories with inflation above 3% is 6 on a weighted basis.

Unweighted - that is, category by category - the imbalance is a more muted reading of 2 on the 0-to-10 scale.

Those categories where the price rises are fastest are in video/ audio, financial services, medical services and airfares/ transportation.

Measure of the breadth of high inflation remains above the average over 1990-2019, when inflation averaged roughly 2%, especially on a weighted basis, but well below the pandemic peak

Of some comfort to Warsh might be Rindels' forecast that by the fourth quarter of this year house rentals will start to fade as a factor and dip below 3%.

Since the Warsh testimony last week, generally considered hawkish in tone, U.S. 2-year Treasury BX:TMUBMUSD02Y yields have ticked down from almost 4.3% to 4.18% Monday. At present, according to CME FedWatch expectations, traders ascribe an 85% probability of no change in rates in the July mneeting but a 52% chance of a 25 basis point hike in Sept.

In pre-market trading Monday S&P futures were indicating the index up 22 bps.

-Jules Rimmer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

07-20-26 0532ET