Insights 
VT 
Goldman Sachs anticipates that tariffs will increase goods prices and overall inflation in the coming months. Core inflation is expected to rise, despite moderation in labour, housing, and automotive sectors.
The bank projected a modest tariff-related impact on the May CPI report, with core inflation increasing by 0.05 percentage points to 0.25% month-on-month. Core inflation may reach 3.5% by year-end, rising from 2.8% in April. Goods are expected to contribute more to inflation than services, with hotel and airfare prices likely to remain unchanged.
Us Cpi Data Release
In previous reports, the US CPI data release was scheduled for Wednesday, with core inflation anticipated to be just under 3% year-on-year. Other firms such as BofA and Morgan Stanley also provided forecasts for the May US CPI report. The data was set to be released at 0830 US Eastern time.
To break down the existing content first, Goldman Sachs has said that the coming months will likely see higher goods prices, leading inflation upwards. While areas like housing, cars, and jobs are cooling, that won’t be enough to stop the rise in prices elsewhere. Specifically, core inflation, which strips out more volatile items like food and energy, is expected to rise steadily this year.
The bank estimated that the most recent Consumer Price Index (CPI) report for May would show a slightly higher increase because of new tariffs—by about 0.05 percentage points. That brings the expected month-on-month core inflation number to 0.25%. Over the course of the year, they believe we’re headed towards a 3.5% rate, noticeably up from 2.8% in April.
Most strikingly, goods—rather than services—are seen as the primary force behind the climb. By contrast, hotel rates and flight prices are expected to show little to no movement. This division is important for breaking down what’s driving the uptick. Others in the market, including BofA and Morgan Stanley, are also watching the CPI release closely, which had been expected early Wednesday morning in New York.
Impact On Market And Strategy
Now, thinking about what all this means over the next few weeks, we should start by paying more attention to goods-sensitive instruments and contracts. Price action in consumer durables, retail-linked positions, and even the soft commodities space might start reacting more quickly than previously assumed. If that expectation for an annual core rate of 3.5% materialises, short-dated rate bets could shift in pace. Even a 0.25% monthly rise would push swaps pricing for the next FOMC decision, as base assumptions for cuts or pauses may need frequent adjustment.
Because services inflation appears more rigid and less volatile for now, there’s scope to reweight away from sectors highly linked to travel or hospitality exposure in the short term. What matters here is speed—tariff effects can push certain price series upwards more quickly than would otherwise emerge through consumer demand. So we may start to see outsized volatility in the goods portion of both CPI readings and market reaction.
Blankfein’s team hasn’t suggested runaway inflation, but the direction is clear: upward pressure doesn’t appear fully priced in across all tenors. That’s where many may be caught leaning the wrong way, particularly those set up for deflationary momentum into Q3.
For us, it means revisiting our position risk on any rates-linked exposure vulnerable to re-pricings from surprise CPI beats. Not in wholesale terms, but tweaking risk across short leg spreads could become more essential as the July report nears. Among other things, renewed strength in headline figures—even if driven by just a few categories—may require faster adaptations than usual.
Careful attention should be paid to when seasonal adjustments wear out their cushioning effect. Particularly through August and September, we ought to consider that prior easing in supply bottlenecks may no longer anchor goods inflation as firmly.
Lastly, assumptions relying on a one-directional path for shelter or auto-related inflation from here on out look increasingly optimistic. Any bounce in either—should wage stickiness of previous quarters resurface—could disrupt market rhythm even more sharply. That creates fertile ground for reaction trades, but also plenty of traps.
