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GS Adam Crook - GS MORNING: 1) Jan Hatzius’ Latest, 2) Connecting you to GS, 3) Latest FX Trader, 4) Equities Update and 5) Week Ahead Previews 17 Aug 2026 Adam Crook · Goldman Sachs · Managing Director, FICC & Equities Mon 17 Aug 2026, 4:28am ET

Highlights from GS Research, Sales, and Trading: 1) Jan Hatzius’ Latest, 2) Connecting you to GS, 3) Latest FX Trader, 4) Equities Update and 5) Week Ahead Previews.

1) GLOBAL ECONOMICS (HATZIUS) – Global Views: They’re Not Hiking

Chief Economist Jan Hatzius out with his latest ‘Global Views’. Key sections on the US below. The full piece also covers Europe, China, and more.

Retail Sales: Based on the details of the PCE and CPI reports, we estimate that the three-month annualized pace—which smooths across the Prime Day noise—of real core retail sales growth fell to +1.1% from +4.1% in June. We lowered our Q3 GDP tracking estimate by 0.5pp to +2.2% (quarter-over-quarter annualized). The revised path now looks much more consistent with our view that real spending growth will slow to 1–1.5% in H2 as real cash flow stagnates. The risks to this forecast are on the downside because the Strait of Hormuz remains closed and a renewed spike in gasoline prices would further hurt consumers, especially those with lower and middle incomes.

Labour Market: With nonfarm payrolls and household employment down on the month, our estimate of underlying trend job growth slowed further to just 5k in July. Since this is below our estimate of breakeven job growth of 50k, similar numbers in coming months would probably reverse some of the decline in the unemployment rate from 4.5% in December to 4.1% in July. We think this decline deserves less weight than it normally would because it has been driven by lower labor force participation, not higher employment. The continued weakness in wage growth also argues against the notion that the labor market is tightening.

Inflation: The US inflation news has improved meaningfully in the past two months. Following a 0.13% increase in June, core PCE is on track for 0.20% in July, with more than half of this gain coming from portfolio management services. That category is not only poorly measured and defined—most people don’t view paying a constant percentage fee on a growing portfolio as a price increase—but will also get revised repeatedly in coming months, with a large downward revision coming at the end of September. With other temporary inflation drivers such as tariffs, software/accessories, and energy likely to subside as well—some soon, others later—we continue to expect core PCE inflation to fall to near 2% in 2027.

FOMC: Although 9 of the 18 FOMC participants that submitted dots at the June meeting projected hikes in 2026, we estimated at the time that only 4–5 of the 12 voting FOMC members fell into this group. Since then, the hawks have become louder, with three outright dissents at the July meeting. But after two months

of materially softer jobs and inflation data, it’s hard to see any of the doves shifting toward hikes. Therefore, a hike at the September meeting has become very unlikely, barring a dramatic shift in the tone of the August data due in early September (which we don’t expect). And under our baseline economic forecasts, the inflation news is more likely to improve further than to deteriorate anew as the year progresses. Hence, we still think market pricing for the funds rate is too hawkish.

CHART 1: Retail Sales Control Group. Source: Department of Commerce, Goldman Sachs Global Investment Research.

CHART 2: Impact of Temporary Inflation Drivers on YoY Core PCE Inflation Should Improve Sharply Over the Next Year. Source: Goldman Sachs Global Investment Research.