Goldman Sachs expects core US inflation to remain elevated through the end of 2026 before cooling significantly in 2027. The bank believes fading artificial intelligence-related price pressures and weaker energy effects will help inflation move closer to the Federal Reserve’s target.
Core PCE Inflation Could Fall Sharply in 2027
Goldman Sachs analyst Manuel Abecasis forecasts that annual core Personal Consumption Expenditures inflation will reach 3.2% in December 2026.
However, core PCE inflation is expected to slow to 2.2% by December 2027 as the temporary effects of AI-related costs and energy prices gradually disappear.
Core PCE is closely monitored by the Federal Reserve because it excludes volatile food and energy prices and provides a broader view of underlying inflation trends.
Goldman Predicts Lower Core CPI Inflation
Goldman Sachs also expects core Consumer Price Index inflation to decline over the same period.
The bank forecasts annual core CPI inflation of 2.6% by December 2026, followed by a slowdown to 2.2% in December 2027.
According to Goldman, core CPI is less exposed than core PCE to AI-related measurement distortions and movements in the stock market. This could make it a clearer indicator of underlying consumer price pressures.
US-Iran Agreement Eases Energy Price Pressure
The agreement between the United States and Iran has provided some near-term relief for the inflation outlook, according to Goldman Sachs.
The bank’s commodity analysts lowered their average oil price forecast to $80 per barrel for the fourth quarter of 2026. They also expect oil to average approximately $75 per barrel in 2027.
Lower energy forecasts could reduce the upward pressure on headline PCE inflation by around 0.2 percentage points this year. Goldman also expects approximately 0.05 percentage points less pressure on core PCE inflation than previously estimated.
The firm’s preliminary estimates for June show headline CPI declining by 0.13% on a monthly basis. Headline PCE inflation is projected to increase by only 0.07%.
AI Demand Has Increased Technology Prices
Goldman Sachs identified AI-driven demand for computer memory as an underestimated source of inflation.
Strong demand for memory components has contributed to rising prices for computer software and accessories. Measurement methods used within the core PCE index may have amplified the inflationary impact of these increases.
Goldman estimates that monthly inflation for software and computer accessories has recently been running at approximately 4% to 5%.
However, the bank expects that pace to slow considerably, reaching around 0.6% by the fourth quarter of 2026 as supply conditions improve and AI-related price pressures weaken.
Rent and Wage Growth Could Support Disinflation
Despite the temporary pressures caused by technology and energy prices, Goldman Sachs remains positive about the underlying US inflation outlook.
Abecasis expects rent growth to slow below its pre-pandemic pace. Housing costs have been one of the most persistent drivers of inflation in recent years, making slower rent increases important for continued disinflation.
Goldman also expects slower nominal wage growth to place downward pressure on inflation within core services excluding housing.
Moderating wage increases could reduce operating costs for businesses and limit the need for further price increases across service industries.
Middle East Tensions Remain a Key Risk
Although Goldman expects inflation to decline during 2027, the bank warned that risks remain tilted to the upside.
A renewed deterioration in the Middle East could push oil and energy prices higher. Such a development could reverse some of the expected inflation relief and place additional pressure on both headline and core inflation.
Goldman’s forecast therefore depends partly on energy markets remaining relatively stable and AI-related technology costs continuing to normalise.
