Goldman Sachs sees war slowing growth, raising inflation this year

The investment bank said early Thursday that the Iran war could have a sustained, if modest, impact on the U.S. economy, with inflation and unemployment higher and growth slower.

Goldman now thinks the Federal Reserve won’t cut its key interest rate until September, and its forecasts suggest Americans will keep seeing higher costs for gas, utilities and potentially groceries as they prepare to vote in this year’s elections.

Before this war began, Goldman forecast that inflation would cool as the impact of Trump’s tariffs fades. The bank now expects the Fed’s preferred inflation measure to end this year at 2.9%, remaining above the Fed’s target of 2%.

And that’s based on average oil prices rising 40% to $98 a barrel in March and April. Should the war cause oil prices rise to an average $110 over those two months, inflation would hit 3.3%, Goldman economists estimate.  — AP