Goldman Sachs has warned investors that a midterm election season focused on inflation could prove to be a self-fulfilling prophecy, forcing the Federal Reserve to tighten monetary supply even more aggressively to prevent a wage-price spiral from spinning out of control.
“Potential further increases in food and gas prices are the main upside risk to consumer inflation expectations,” the company’s analysts said. “But another key upside risk is the coming barrage of political advertisements highlighting high inflation ahead of the midterm elections in the next few months.”
