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Goldman Sachs said Tuesday that it believes developed economies around the world should see a lowering of core inflation over the coming months, which should provide central bank officials the confidence needed to start lowering interest rates.
“We expect DM core inflation to cool to 2.2% over the next year, enabling major central banks to initiate rate cuts in the coming months,” Goldman Sachs portfolio strategy research team said in an investor note.
The investment institution added: “Our model suggests that lagged inflation, supply chain pressures, and labor market tightness play an outsized role in driving core inflation in high-inflation periods—although they contribute much less in low-inflation environments— while inflation expectations, stronger growth, and energy price increases have only modest effects on their own.”
Outlined below is a chart that Goldman Sachs provided spotlighting where it believes core inflation will cool towards for areas such as the U.S., the Euro region, the U.K., as well as Canada and Australia.
Looking at Tuesday’s trading, the major market averages have started off the day lower.
Dow, S&P, and Nasdaq tracking ETFs: (NYSEARCA:DIA), (DDM), (UDOW), (DOG), (DXD), (SDOW), (NYSEARCA:SPY), (VOO), (IVV), (SSO), (UPRO), (SH), (SDS), (SPXU), (NASDAQ:QQQ), (QLD), (TQQQ), (QID), and (SQQQ).
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