Goldman Sachs Says Inflation Is Now More Important Than Employment
Goldman Sachs' chief economist stated that inflation data is now more important than employment data.
Jan Hatzius pointed out that next week's inflation data will show whether June's strong performance was a one-time event or the beginning of a softer trend, with Goldman Sachs believing the latter is more likely. The weight of inflation numbers on Federal Reserve policy decisions will surpass that of employment.
This is the latest judgment from Wall Street's top institutions regarding the priority of the Federal Reserve's dual mandate, shifting focus to potential adjustments in the policy response function. The market benefits from a reassessment of the soft landing path, while employment-sensitive assets are under pressure due to decreased attention.
Source: Public Information
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Against the backdrop of a relatively stable job market, inflation stickiness has become the core constraint of monetary policy. Goldman Sachs interprets the improvement in June inflation as a potential trend starting point, suggesting that the Federal Reserve may be more patient in waiting for price data confirmation.
This judgment affects interest rate path expectations and risk asset pricing. The motivation is to guide the market from an employment-sensitive to an inflation-sensitive trading framework.
Similar to the previous phase of switching the weight of the dual mandate, the current phase is characterized by "inflation risk regaining dominance."
Essentially, this represents a transfer of pricing power: policy focus shifts from employment protection to inflation control, mechanism-wise placing price stability above short-term employment fluctuations.
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When employment is no longer urgent, inflation will take center stage again.
Once data priorities change, the entire market's trading logic will follow suit.
The true confirmation of a soft landing ultimately depends on whether prices can continue to decline.