As of early 2025, U.S. inflation rates have shown signs of persistence. In January, the annual inflation rate edged up to 3%, slightly above December’s 2.9%. This trend has raised concerns among economists and policymakers. For instance, Goldman Sachs has increased its year-end 2025 core Personal Consumption Expenditure (PCE) inflation forecast to 3.5%, up from previous estimates.
Several factors are contributing to this inflationary pressure. The Trump administration’s proposal to implement reciprocal tariffs averaging 15% across all U.S. trading partners is a significant development. These tariffs are expected to hinder economic growth and contribute to higher consumer prices. Consequently, Goldman Sachs has raised its recession probability forecast to 35% for the next 12 months, up from a previous estimate of 20%.
In response to these economic challenges, Goldman Sachs anticipates that the Federal Reserve may implement three interest rate cuts in 2025 to stimulate growth. However, the timing and effectiveness of such measures remain uncertain, especially given the complex interplay of tariffs, inflation, and potential recession risks.
Overall, the inflation outlook for 2025 is influenced by a combination of domestic policy decisions and global economic factors. While some forecasts suggest a potential easing of inflation later in the year, others warn of persistent inflationary pressures due to trade policies and other economic challenges. Staying informed through reputable financial news sources will be crucial for understanding how these developments unfold throughout the year.