00:00 Speaker A
Let’s talk about inflation a little bit more and dig into that because you just said you expect headline inflation to peak in the next couple of months. What if the straight remains closed through labor day? And what about the fact that we saw core PC up 3.3% in April on a headline basis up nearly 4%, wholesale prices up 6% and you warned back on April 16th that we’re already starting to see energy prices, higher energy prices being passed on. You’re not worried that we could see broader ripple effects for price increases that are stickier? You’re not worried about longer lasting inflation?
00:46 Speaker B
Well, I’m I’m I’m obviously thinking carefully about that and uh but let me go back to where where inflation is really elevated right now. And it’s really in in goods. So we’re seeing in energy goods and uh anything that uses a lot of fuel uh or energy. So definitely we’re seeing that and that’s from the conflict of the Middle East. We’re also seeing in imported uh goods through the effects of tariffs. And there’s a third category as well. We’re seeing in prices of chips and semiconductors. That’s being driven, I think, in large part, I mean, primarily by the AI boom and the global demand for chips. So those are the three areas in the goods category that we’re seeing the higher inflation. When you look at services, uh you look at housing services, other services, that inflation actually has come down quite a bit, and I think it’s it’s going to stay, you know, relatively steady or continue to come down. So I feel like a lot of the inflation is because of tariffs, because of uh higher energy prices, but also this added thing around and chips. So, you know, when I think about is infla, you know, how do I see inflation in the next you know, six months or so? I expect the tariff effects to basically be kind of near their peak from the past uh tariffs, depending on what happens in the Middle East. Uh hopefully energy prices will stabilize and and maybe even come down later when the straight reopens and and uh and on the AI, I think that we’re going to continue to have some upward pressure on inflation. Right now, I’m not that worried about, you know, uh dramatic second round effects or persistent inflation. We haven’t seen any indications of that. Um inflation expectations remain well uh anchored. We’re also seeing uh costs from the labor side be very contained and consistent with low and stable inflation. Labor market is I think in a good balance. So we’re definitely getting some drivers of inflation higher, uh but other factors I think are kind of more pointed to a stabilization to to uh lower inflation. But again, I don’t want to take anything for granted, watching all these indicators the data very carefully to make sure that the inflation that we’ve seen recently does not get embedded uh into higher higher more persistent inflation because that obviously would be a an outcome we I don’t want to see.
03:19 Speaker A
So it sounds like at this point you feel like you can look through this.
03:22 Speaker B
Well, I mean, when you say look through, I think you have to be, you know, I mean, you know, kind of careful about what that means. I mean, yes, in the terms of I don’t expect energy prices to increase dramatically next year and the year after. So it’s more of a one-time uh kind of effect. But I do think there’s always, we always have to keep in mind that higher energy prices means higher airfares, it means higher fertilizer prices, which means higher food prices. So there are effects that of energy prices and some of the tariffs that probably will last through the year and into next year. And it’s really just looking for are there other signs of kind of inflation getting more more persistently embedded. I’m not seeing that yet, but definitely there’s a risk of that given, you know, how much of a kind of a boost to inflation we’re seeing.