Goldman Sachs: We can explain almost the entire US inflation overshoot by tariffs and the war in Iran

Goldman Sachs analysts reported that tariffs and the war in Iran can together account for nearly all of the recent overshoot in US inflation relative to expectations. The transmission runs through two channels: tariffs raise import prices directly and pass through to consumer goods, while the Iran conflict pushes up energy costs, feeding headline inflation and inflation expectations. Because the attribution frames the overshoot as supply-driven rather than demand-driven, it complicates the case for rapid policy easing, supporting the US dollar via rate-differential expectations. Rate-sensitive assets such as Treasuries and growth equities are most exposed to any repricing of the Federal Reserve path, while energy-linked markets remain sensitive to developments in the Iran conflict. Traders should watch the next Consumer Price Index release and the Personal Consumption Expenditures deflator for evidence of whether tariff and energy pass-through is persisting in core goods and services.

The US Dollar (USD) is the world's primary reserve currency and the base for most forex majors. Headlines about Federal Reserve policy, US macro data (CPI, NFP, GDP), and Treasury yield shifts typically drive USD pair direction within seconds of release.

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