00:00Can you describe what's shifted for you in terms of your expectation for inflation and how that kind of bleeds
00:05into your call?
00:06Yeah, I didn't think we'd be here six weeks later with the Strait of Hormuz still blocked.
00:11I thought we would be in the endgame. We talk about it reopening.
00:15There would be moderation in oil prices and take some pressure off of inflation.
00:21It seems like we're more in the middle of it still.
00:24So does that mean it goes on for another six weeks to two months?
00:27It could do. And then you're stuck with energy prices that are higher.
00:31You're stuck with gas prices that are over four dollars a gallon.
00:36And you're forcing businesses to make a decision.
00:39How long do they absorb those costs versus trying to push them on?
00:43You will see some demand destruction.
00:45But remember, this time last year, we thought tariffs would create a lot of demand destruction.
00:50It did initially, but then the economy picked up again without missing a beat.
00:55So I'm reluctant to say this time the economy will stumble.
01:00It didn't last year. It might actually absorb that this year.
01:03What's the unexpected you worry about?
01:07The unexpected is that things spiral out of control.
01:11You do have one hundred and fifty dollar oil per barrel that starts to push through and create a lot
01:18of demand destruction.
01:19And then the Fed's in a very uncomfortable spot.
01:23You've got very high headline inflation, but you've got an economy that's about to tip into recession.
01:29They have to decide which decision they make.
01:33Right now, we're talking about they could just remain on hold through year end and see how things play out.
01:39But a material spike higher would create a lot of problems.
01:42Do you think we're really close to that tipping point right now?
01:44I don't think so.
01:46It feels a little different than actually a couple months ago.
01:50It feels as though there are workarounds that are going on.
01:55We know there's an east-west pipeline.
01:57The 80 percent of oil that doesn't pass through the Strait of Hormuz probably could increase capacity.
02:03We're already seeing the UAE talking about leaving OPEC.
02:08So I don't think we'll get there, but you certainly can't take it off the table.
Comments