Extended Oil Shock Spells Higher, Sticky Inflation

Summary

Yelena Shulyatyeva discusses the potential for higher gasoline prices due to blockade, limited pass-through to core inflation so far, and the Fed staying on hold. She highlights that AI-related investment drove most GDP growth, posing a concentration risk as consumer spending slows.

• Gasoline prices could reach $5 if the blockade persists into summer.
• Pass-through of oil to core inflation is limited but could widen if high prices persist.
• Fed is on hold due to healthy labor market and new chair coming.
• Rate cuts projected for next year as normalization, not market-driven.
• AI investment accounted for 80% of Q1 GDP growth.
• Consumer growth is slowing, making the economy reliant on a narrow sector.
• Demand destruction and significant economic slowdown are expected eventually.