- If oil stays high for months on and at some point it leads into core inflation.
- A high and persistent oil shock would not have a transitory impact on inflation.
- Based on the jobs report was planning to dissent, but since then inflation has become more of a concern
- Zero job growth does not seem normal, but that is what the math may indicate will keep the unemployment rate stable
- Fed cannot look through a large and persistent will shock, at this point caution for the Fed is warranted.
- Wants to wait and see how this evolves before deciding on rate cuts for later this year.
- Fed is making progress on taming structural inflation, which may be close to 2% now but is held higher by tariffs.
- Do not think there is a need to consider rate hikes.
- Inflation expectations are not unanchored.Investors understand inflation will drop once tariffs rolloff.
- If the tariff effects don’t roll off in the 2nd half of the year it will be tricky.
- A shock of the right sort could push companies to start cutting labor. It could be the price of oil moving higher.
- Consumer outlook could also be damaged with gas prices rising.
- No reason to make bank reserves scarce just to reduce the balance sheet.
This article was written by Greg Michalowski at investinglive.com.