Global Economics Analyst Where in the World Is There Still an Inflation Problem

Economics Research 22 September 2026 | 9:12AM BST

Where in the World Is There Still an Inflation Problem?

n Core inflation is close to target in most countries but is still notably higher in the Megan Peters | US, especially in PCE terms. On the surface, this suggests that the US is a global Goldman Sachs International outlier in still having a meaningful inflation problem. But a decomposition of the inflation baskets implies that, if anything, the US has less of an inflation problem than the rest of the world. n We decompose the inflation basket into three categories. First, we find that core goods inflation has returned to long-run trends in both EMs and non-US DMs, reflecting post-pandemic normalization and disinflationary effects from increased Chinese goods supply. In contrast, core goods inflation remains elevated in the US due to temporary boosts from tariffs and AI measurement distortions. n Second, non-shelter services inflation remains elevated in EMs and most DMs, particularly in the US PCE data. But after harmonizing the treatment of medical and financial services, non-shelter services inflation in the US looks more benign than in other DMs. Moreover, unit labor cost (ULC) growth appears contained in the US but elevated elsewhere, a pattern that points to more risk of sustained inflation pressures outside of the US. n Third, shelter inflation has fully normalized in the US and in EMs on average but remains quite elevated in other DMs, particularly those where the pullback in immigration has been more limited. n To formally assess the implications of these patterns, we estimate target-consistent inflation rates for each of the three components and for each country. Using these estimates, we identify the components preventing a return to target across countries. The upshot of this exercise is that the global inflation overshoot is largely driven by services, but in the US a large share of the overshoot comes from an increase in goods inflation that will likely reverse. Given that services inflation tends to be stickier, our results suggest that the US has less of an inflation problem than other countries, despite what current top-line measures suggest.

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Goldman Sachs Global Economics Analyst

Where In the World Is There Still an Inflation Problem?

Core inflation is only modestly above target in most countries but more significantly in the US, especially in PCE terms (Exhibit 1). On the surface, this suggests that the US is a global outlier in still having an inflation problem. In this Global Economics Analyst, we examine the drivers of these trends by considering the cross-country inflation data at a more disaggregated level. The upshot of our analysis is that, if anything, the US has less of an inflation problem than the rest of the world.

Exhibit 1: Core Inflation Is Close to Target On Average in Most Countries but Remains Elevated in the US

Source: Haver Analytics, Goldman Sachs Global Investment Research

To examine the drivers of the divergence in topline core inflation statistics, we decompose the core inflation basket into three categories: core goods, non-shelter core services and shelter inflation.

Core Goods Inflation First, core goods inflation has on average returned to long-run trends in both EMs and non-US DMs but remains around 3pp above its pre-pandemic trend in US PCE data and 1pp above its trend in US CPI (Exhibit 2).