Goldman's Jan Hatzius Believes the Hard Part Is Over

Global Factors

Jan Hatzius, chief economist at Goldman Sachs, highlights the global factors influencing inflation and disinflation trends. He emphasizes that COVID-19 has been the dominant factor affecting the global economy over the past few years, leading to significant disinflation without major labor market disruptions 1. Hatzius notes that the inflation experience across different regions is converging, with Europe and the UK now reporting more favorable inflation numbers 1.

The dominant issue that has faced the global economy over the last three and a half to four years has been COVID, and the recovery from COVID.

--- Jan Hatzius

This convergence suggests a shared global economic trajectory, despite varying policy responses across countries.

   

US Inflation

In the US, Hatzius asserts that the hardest part of managing inflation is over, with significant disinflation achieved without harming the labor market 2. He attributes this success to a balanced approach that avoided pushing the economy into recession. Despite a large federal deficit, he believes fiscal policy will remain stable, especially with the upcoming presidential election in 2024 3.

We have a proof of concept that we can bring down inflation and rebalance the labor market without having to crush the economy.

--- Jan Hatzius

This outlook reflects optimism for continued economic stability and growth in the coming year.