Gas prices have significant implications for Fed's inflation forecast: Apollo Global's Torsten Slok

Summary

Torsten Slok discusses the Fed's hawkish dot plot showing nine members expecting a 2025 rate hike, the subsequent sharp drop in oil prices, and how that decline could alter the inflation outlook and trigger two-way volatility. He also addresses AI's impact on the labor market, arguing that entrepreneurship enabled by cheap AI tools could create more jobs than displacement eliminates.

• Fed dot plot revealed 9 of 18 members penciling in a rate hike this year, a hawkish signal
• Kevin Warsh's task forces aim to improve clarity on Fed balance sheet, communication, and data
• Oil prices fell dramatically from $120 to below $80/bbl, pulling national average gasoline below $4
• Lower energy prices have significant implications for inflation forecasts and may undermine the hawkish dots
• Fed funds futures repriced, now showing a rate hike in September versus January before the meeting
• Slok expects elevated volatility as markets digest conflicting signals between hawkish Fed and falling oil
• AI-driven entrepreneurship is generating record new business applications, potentially net-positive for employment