Hatzius's forecast, a headline print around 0.05% month on month and core near 0.19%, would sit in line with or slightly below consensus and reinforce the softer trend he says began in June, a read that would ease pressure on the Fed heading into September if it holds. The more consequential number in the interview may be the sharp downward revision to Goldman's underlying payrolls trend, from around 75,000 to just 5,000 a month, which underscores how quickly the labour picture has deteriorated beneath the noisy monthly headlines. Hatzius's view that no hike is needed this year, resting on rent and wage inflation continuing to trend down. The exchange over whether the Fed sticks with core PCE as its primary gauge also matters for how markets interpret future data, given Warsh has left open the possibility of shifting the preferred metric, a change former New York Fed president Bill Dudley has already criticised as a credibility risk.---Hatzius thinks the inflation fight is still winnable without a hike, even as he guts his own jobs forecast.Summary:Goldman Sachs chief economist and head of global investment research Jan Hatzius told Fox Business in an exclusive interview he expects July's CPI print to look similar to June's more benign reading, forecasting around 0.05% month on month on the headline index and 0.19% on core, both in line with or slightly below consensusHe attributed the first five months of 2026's worse than expected inflation to temporary drivers, tariff pass-through, the oil price impact, and a World Cup effect, all of which he says are now fadingTariff pass-through is largely behind the economy on a month to month basis but still adds about 0.7 percentage points to core PCE inflation, currently running at 3.3% year on year, a drag he expects to trend toward zero over the next 6 to 12 monthsAsked about Fed Chair Kevin Warsh's suggestion the Fed may move away from core PCE as its preferred inflation gauge, Hatzius said he still expects PCE to remain the Fed's primary long-term focus even into 2027 and beyond, though he said Warsh's comments need clarificationHatzius agreed with Warsh's firm restatement of a 2% inflation target, but said Goldman's forecast does not include a rate hike for the remainder of the year, arguing natural downward forces including rent and wage inflation make one unnecessary even though one remains possibleFollowing July's surprise nonfarm payrolls decline of 23,000 against an expected 80,000 gain, Goldman sharply cut its estimate of the underlying monthly job creation trend to around 5,000 from roughly 75,000 previouslyAsked how the US economy is doing overall, Hatzius said "pretty well," citing GDP growth of 2% to 2.5% expected over the next one to two years and a low, stable unemployment rate, while acknowledging inflation remains the persistent problem of the past five yearsGoldman Sachs chief economist and head of global investment research Jan Hatzius told Fox Business in an exclusive interview that he expects Wednesday's July consumer price index reading to look similar to June's more benign print, ahead of a release that could shape the Federal Reserve's next move on interest rates. Hatzius said the first five months of 2026 came in worse than expected on inflation, but that June marked the start of a softer trend, with July likely to bring a headline reading around 0.05% month on month and a core reading near 0.19%, both in line with or slightly below consensus expectations.Hatzius pointed to several temporary factors behind the earlier run of hotter inflation, including tariff pass-through, the impact of higher oil prices, particularly on the headline index, and a World Cup related effect, all of which he said are now fading. On tariffs specifically, he said the month to month impact is largely behind the economy, though the year on year effect still adds about 0.7 percentage points to core personal consumption expenditures inflation, the Fed's preferred gauge, which is currently running at 3.3%. He expects that tariff contribution to trend toward zero over the next six to twelve months.The interview also touched on a potential shift in how the Fed measures success. Fed Chair Kevin Warsh has recently signalled the central bank's preferred inflation measure may change from core PCE, prompting former New York Fed president Bill Dudley to argue in a Bloomberg opinion piece that such a change would damage the Fed's credibility. Hatzius said he did not interpret Warsh's comments as confirming a firm switch away from PCE, describing the answer as left a little open and in need of clarification, and said his own expectation is that PCE remains the Fed's central focus even heading into 2027 and beyond.On the target itself, Hatzius endorsed Warsh's recent firm restatement that the Fed maintains no soft inflation target and is committed to 2%, saying that figure remains the right number and that being off by a few tenths over the long run, as the US was during the two decades before the pandemic when inflation averaged 1.6% to 1.7%, would not represent a serious problem. Even so, he said Goldman's current forecast does not include a rate hike for the remainder of the year, arguing that underlying downward forces, including cooling rent and wage inflation, make further tightening unnecessary, while acknowledging a hike remains possible.The conversation also addressed July's weak labour market data. After Friday's nonfarm payrolls report showed a decline of 23,000 jobs against expectations for an 80,000 gain, Goldman sharply revised down its estimate of the underlying trend in monthly job creation, to around 5,000 from roughly 75,000 previously. Hatzius explained the figure is derived by averaging payroll numbers over the past three months and household survey employment data over the past nine months, a longer window chosen because that survey is noisier, then weighting the two to extract the underlying trend from otherwise volatile monthly readings.Asked in simple terms how the US economy is performing, Hatzius said it is doing pretty well, pointing to expected GDP growth of 2% to 2.5% over the next one to two years, broadly consistent with the economy's sustainable long-term trend, alongside a low and stable unemployment rate. He said inflation remains the standout problem after five years of excessive price growth, but expressed confidence the economy remains on a path toward a better inflation picture as it moves into 2027, even though the process has taken longer than initially expected. This article was written by Eamonn Sheridan at investinglive.com.