Inflation could remain high this year despite improved economic outlook and easing recessionary concerns, Goldman Sachs CEO and Chairman David Solomon said.

In a new podcast, Solomon noted that the economic outlook this year appears to be more positive as the likelihood of a recession in the US fades, but there are still some headwinds to deal with.

The challenges, which include rising geopolitical risks and the US elections, are causing uncertainty and this could result in more volatility and impact investment decisions.

While prices have eased, Solomon acknowledged that there is more of a risk that the US Federal Reserve is still more conscious of inflation than what the market currently expects. Central bank decisions could also be impacted by the current political environment.

“I think the Fed will watch the data and to the degree that the data warrants, we will see appropriate action, but I’m not quite as bullish as everyone else that we’re going to see a series of cuts this year and we’re going back to an environment of much, much lower interest rates,” Solomon said.

“I think we have a significant number of headwinds that are going to still keep interest rates higher for longer.”

Goldman Sachs Research also noted that home prices in the US alone could increase more than previously anticipated.

The increase would be around 5% this year, higher than the previous forecast of 1.9%, according to Roger Ashworth, Senior Strategist at Goldman Sachs Research, and Vinay Viswanathan, Analyst.

By next year, prices could rise by 3.7%, higher than the earlier forecast of 2.8%.

(Writing by Cleofe Maceda; editing by Seban Scaria)