Goldman Sachs is out with a note today highlighting downside inflation pressures from oil. I’ve been writing about this for awhile, noting that oil is trading more than $20 below where it was at this time last year, adding a powerful drag for crude.
Looking out further, Goldman Sachs sees continued low prints and heading below 2%.
Using the oil futures curve, “we would .. expect headline CPI inflation of 1.8% year-over-year next April, roughly in line with what’s currently priced into inflation swaps,” they write.
There is some counter-seasonality late this year to run against crude but in early 2025, it all begins to align and that should keep the Fed dovish.
That said, any forecast based on the price of oil at a time when 1) The Middle East is instable and, 2) China is stimulating, is a highly-variable forecast.