Goldman Sachs lifts 2026 inflation forecast as oil shock risk rises

Goldman Sachs has shifted its 2026 inflation outlook toward a more oil-driven shock, with headline prices expected to rise faster than core and keep the Federal Reserve cautious for longer. In the bank’s baseline oil-shock case, December 2026 headline PCE is now 3.1%, up 1 percentage point, and the index is expected to peak at 3.6% in April as gasoline prices jump 12%. Core PCE was lifted only modestly, to 2.5%, reinforcing the bank’s view that energy is doing the damage first.

That distinction matters because gasoline hits consumers immediately, but the inflation pass-through to the broader economy is slower and less complete. Goldman’s rule of thumb is that a sustained 10% rise in oil prices adds about 0.2 percentage point to headline PCE and 0.04 point to core PCE, while shaving roughly 0.1 point off GDP growth. March consumer data already pointed in that direction, with gasoline up 21.2% and accounting for nearly three-quarters of the monthly increase in headline CPI.

For clients, the message is less about one month of price spikes than about how long the shock can linger in the macro tape. Goldman’s economists now see the first Federal Reserve rate cut shifting to September from June, with a second move in December, because a tougher inflation path could leave policy tight for longer. That changes how rates desks, macro funds and corporate treasurers think about the rest of the year, especially if energy volatility starts to affect hiring and capital spending rather than just pump prices.

The bank’s scenario work shows how quickly the outlook can deteriorate. Under a baseline six-week disruption to Strait of Hormuz flows, Brent crude would average about $105 in March and $115 in April before easing to around $80 in the fourth quarter of 2026. A more adverse 10-week disruption would push Brent to about $140 and headline PCE to a 4.6% spring peak. In a severely adverse case involving infrastructure damage and more persistent production losses, Brent would reach $160, headline PCE would peak at 4.9%, and December 2026 headline PCE would still be 4.0%.

The revision is a sharp turnaround from Goldman’s earlier pre-war view, when it expected Brent to average $56 a barrel and WTI $52 in 2026 amid a projected surplus of about 2 million barrels per day. Even after a ceasefire, Goldman had trimmed second-quarter Brent and WTI forecasts to $90 and $87, but it kept both downside and upside risks in play. For Goldman’s own teams, from economists to sales and trading, that means more client conversations anchored in one question: whether oil is a temporary inflation jolt or the start of a longer reset in the macro narrative.