David Mericle

In May 2021, after an April CPI report that far exceeded expectations, Mericle argued that the rise in inflation came mainly from rebounds in prices for travel and other services that had plunged during the pandemic, along with temporary supply shortages, and did not mean inflation would stay high for the next few years; the risks he said to watch included a much faster pickup in wages and inflation expectations becoming self-perpetuating. He forecast at the time that core PCE inflation would peak at 2.8 percent the following month before falling to about 2.25 percent by year-end, and expected the Fed’s tapering of asset purchases to take about a full year, with rate hikes not really on the table until around the first half of 2023.⁠[1][1][1][1][1][1][1][1]

In February 2022, Mericle and Brian Friedman of Goldman Sachs’ Global Markets Division discussed on a podcast how the hawkish shift in Fed policy was affecting economic growth, markets, and investors.⁠[2]

In November 2022, against a backdrop of high inflation and slowing growth, Mericle said U.S. consumers were doing fine: consumption growth had slowed from about 7 percent in 2021 to an annualized pace of about 1.5 percent in the first three quarters of 2022 but had not contracted, which was exactly the kind of slowdown the Fed wanted in order to solve the inflation problem. He expected consumption and GDP growth to stay around 1 percent, below potential but out of recessionary territory, which he called the ideal in that environment.⁠[3][3][3][3]

In June 2023, Mericle said Goldman Sachs was more optimistic than the consensus about achieving a soft landing and avoiding a recession, and had been on the optimistic side of the debate since early 2022; because the labor market had rebalanced enough, the firm had lowered its 12-month recession probability to 25 percent. He also said the inflation outlook had brightened even though realized core inflation had fallen short of hopes.⁠[4][4][4]

In September 2023, Mericle said Goldman Sachs had just cut its 12-month recession probability to 15 percent, about the historical average, judging the risk of aggressive tightening causing a recession to be minor. Reading Chair Powell’s return to the word “carefully” at the Jackson Hole symposium, he judged the Fed very unlikely to hike in September and said the July hike would turn out to be the last of the cycle.⁠[5][5][5][5][5]

In April 2024, after a hotter-than-expected CPI print drew a strong market reaction, Mericle argued that worries about inflation overheating again were overblown: the labor market was not retightening and there was no worrying rise in wage growth or inflation expectations, so the problems that would produce sustained inflation had been solved long before. He expected core PCE inflation to fall from 2.9 percent at the end of 2023 to 2.5 percent by the end of 2024, part of the way back to 2 percent.⁠[6][6][6][6][6][6]

Goldman Sachs: Official website: https://www.goldmansachs.com/ (opens in a new window).⁠[4]