CPI preview: Goldman Sachs flags hotter August inflation on tariffs, travel, and autos

Goldman goes hotter-than-consensus ahead of August CPI release

On the eve of the August inflation report, Goldman Sachs broke from the pack. The bank expects the Bureau of Labor Statistics to show a firmer read on US consumer prices when the data drop at 8:30 a.m. ET on September 11. Its call: core CPI up 0.36% month over month versus a 0.30% consensus, pushing the annual core rate to about 3.13%. For the headline index, Goldman pegs a 0.37% monthly rise versus a 0.30% consensus, reflecting a combination of firmer food and energy.

Under the hood, Goldman expects food prices to rise around 0.35% in August and energy to climb 0.6%. That mix keeps the year-over-year headline rate near 2.9%, roughly in line with Wall Street’s average estimate, but with more heat in the details that the Federal Reserve watches most closely—core services and tariff-sensitive goods.

The bank highlights four forces behind the August acceleration. These are not new problems, but they are reasserting themselves at the same time—and that’s what makes this print tricky for policymakers and markets.

• Used vehicles: A projected 1.2% jump, driven by firmer auction prices and thinner dealer incentives on new models that blunt the usual discounting channel.
• Airfares: A 3% pop, reflecting late-summer seasonality and higher base fares after capacity cuts and higher operating costs earlier this year.
• Motor vehicle insurance: A 0.4% rise, as premium resets continue to catch up with higher repair, parts, and replacement costs.
• Tariff-exposed categories: Elevated prices in communication equipment, household furnishings, and recreation goods as companies push through higher import costs.

Goldman’s tariff math is blunt. Its economists estimate levies are adding roughly 0.14 percentage points to core inflation and will likely keep monthly core readings hovering near 0.3% in the near term. Tariff revenue has surged more than 150% compared with the prior fiscal year, according to the bank’s tally—an indication that the cost burden is real and growing. The message: companies can absorb only so much; more of the bill is showing up on store shelves.

At the same time, the firm argues the broader trend is still cooling beneath the surface. As housing and labor-related pressures moderate, Goldman projects core CPI at about 3.1% by year-end and core PCE near 3.2%. Strip out tariff effects, and the bank thinks both measures would be closer to 2.3%—a sign that policy is working, even if headline numbers don’t show a straight line lower.

One practical wrinkle: core CPI has picked up for two consecutive months on a sequential basis, and Goldman expects that to extend into August. Earlier this year, elevated inventories gave retailers and manufacturers some cushion to hold prices steady despite higher costs. Those buffers have thinned, and with the tariff schedule staggered, firms are spreading price increases over several months rather than taking one big step. That creates a pattern of “higher, but not shocking” monthly gains.

Why it matters for the Fed, markets, and households

For the Federal Reserve, the August report is about momentum. A 0.36% monthly core print lands on the wrong side of comfort and could keep officials cautious about cutting rates quickly. One hot number won’t dictate policy, but another firm core services reading—especially outside of shelter—would complicate the case for aggressive easing at the next FOMC meeting.

Markets are tuned to that nuance. A hotter core tends to support the US dollar and pressure Treasury prices, especially in the five- to seven-year part of the curve where policy expectations cluster. Inflation breakevens could drift up if investors read the report as tariff-driven and sticky, while real yields may rise if traders push out the timeline for rate cuts.

Households will feel this mix in familiar places. Airfare spikes are noticeable, even if they’re seasonal. Car insurance increases have become a monthly nuisance, reflecting a long catch-up after parts, labor, and vehicle values jumped in recent years. And used car prices—while down from pandemic peaks—can swing sharply when auction dynamics tighten or new-vehicle incentives fade.

Goldman points to the tariff channel as the wild card for consumers. The sectors it flags—communication devices, furniture, and recreation goods—are items people replace irregularly, which is why price hikes can sneak up on buyers. Spread across several months, these increases won’t show as a shock in any single report, but they can add up at the register by the end of the year.

Within the inflation basket, shelter will still carry outsized weight. Rent and owners’ equivalent rent tend to lag market conditions by quarters, not weeks. Private rental data show cooler asking rents for new leases versus last year, and that should work its way into official measures over time. Goldman’s view that underlying inflation is easing leans heavily on that shelter slowdown and a gradual step-down in wage growth as the labor market rebalances.

Energy is another swing factor. A 0.6% rise in August, if it lands as Goldman expects, wouldn’t be unusual for late summer and would reflect both gasoline and electricity dynamics. The category is volatile, though, and can reverse quickly if crude prices or refining spreads ease.

Here’s what pros will zero in on when the report hits:

• Core services ex-shelter: Momentum here tells you whether disinflation is broadening beyond housing. Watch medical services, transportation services, and recreation services.
• Shelter: Even small monthly step-downs in rent and owners’ equivalent rent matter because of their weight in the index.
• Used cars and trucks: Auction price trends and dealer incentives can swing this line. A 1.2% rise would mark a notable reversal from earlier softness.
• Airfares: Seasonal adjustment is tricky. A 3% increase would validate airlines’ underlying fare strength into late summer.
• Motor vehicle insurance: Another monthly climb would underline how persistent this category has been in keeping core services sticky.
• Tariff-sensitive goods: Communication devices, household furnishings, and recreation goods will be watched for steady pass-through rather than one-time spikes.

Corporate behavior is central to how this plays out. Earlier in the year, many companies leaned on excess inventories to hold the line on prices, particularly in goods. As those stockpiles normalized, the ability to absorb higher input costs—whether from tariffs, shipping, or labor—diminished. That shift increases the odds of steady, smaller price increases rather than outright discounts heading into the holidays.

Could the report break the other way? Yes. Shelter could cool a touch faster than expected, airfare could undershoot if capacity rebounds, and used cars can still surprise to the downside if auction volumes loosen. Health insurance is another variable, though changes in its CPI methodology typically adjust on a fixed annual cycle that doesn’t always line up neatly with month-to-month expectations.

For policy, the distinction between CPI and PCE will remain in focus. The Fed targets PCE, which puts less weight on housing and more on healthcare, and often runs cooler than CPI. Goldman’s forecast of core PCE near 3.2% at year-end—closer to target but not there—suggests officials will want more proof before declaring victory, especially if tariffs keep nudging goods prices up.

For consumers, the near-term takeaway is straightforward. Travel and transportation costs remain the sore spots—air tickets, car insurance, and parts. Groceries look set for another small climb rather than a break lower. And imported goods that usually offer relief in sales cycles may stay firm as tariffs filter through the supply chain.

For investors, the setup into the print is about asymmetry. A hotter core number likely pushes rate-cut hopes further out and favors defensive positioning in duration. A cooler surprise would do the opposite, giving risk assets air and bumping up odds of a move from the Fed sooner rather than later.

Goldman’s bottom line is a two-handed call: tariffs and a few sticky services categories can keep monthly inflation running a touch hot in the near term, while the broader disinflation trend—driven by cooling shelter and softer labor cost growth—still grinds on. With the data due shortly, the question isn’t whether inflation is falling. It’s whether it’s falling fast enough to convince the Fed to ease without looking over its shoulder.