00:00We have so much news and headlines about Iran today, and it does affect people's economic lives a lot.
00:09I know you can't make a forecast, but what's the best estimate that your people have been able to come
00:15up with now
00:16for what this is going to do to inflation and how quickly?
00:21Well, I think it will directly go into headline inflation because energy prices are an important component of that.
00:27So I expect headline inflation to actually be elevated in the middle of this year.
00:32Of course, if energy prices come back down or stabilize, then that won't add more to inflation.
00:39So right now, my view on inflation is we're looking at an inflation rate for the year as a whole
00:43of something like 2.75%,
00:45but of course it depends what happens with energy prices.
00:48What could we get to in the meantime?
00:50What's the sort of thinking about where inflation on a numerical basis could end up?
00:56Well, again, it's hard to predict that.
00:59Estimate, not a forecast.
01:01Clearly, we can get into above 3% inflation.
01:04I think markets' expectations right now are for CPI to be something like 3.25% over the next year.
01:13But it really depends on what happens, both in terms of how high do energy prices get,
01:18but also how long they stay high or whether they come back down.
01:21Personally, I'm also very focused on what's happening with underlying inflation, core inflation,
01:27inflation expectations, and other indicators as well, besides what's happening to energy prices,
01:31under seeing the broader picture.
01:33Well, what's happening with core inflation?
01:35Yeah, so there I think the story hasn't changed very much.
01:38Clearly, higher energy prices does add a little bit to core inflation.
01:41You think about airfares, which is part of core inflation, but is influenced by fuel prices.
01:49So I expect that to add maybe a tenth or two to core inflation over the year, the energy price
01:54component.
01:54But we've seen tariff rates come down.
01:56We've seen some other, I think, more positive signs on underlying inflation.
02:01So overall, I'm kind of where I've been for a while with core inflation around 2.5% this year.
02:06So I'm kind of where I'm going to go.
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