States the oil price increase is more inflationary than anything else.

Explains the key framework is nominal GDP (real growth + inflation). If inflation rises more than real growth falls, nominal GDP increases, interest rates should rise, and the Fed should lean toward hiking.

Notes this pattern has been seen on and off over the last couple of weeks.

Contrasts with a scenario where real growth falls more than inflation rises, leading to lower nominal growth and potential for lower rates.

Asserts the current situation involves more inflation than decline in the real economy.

Cites tomorrow's March CPI estimate of 0.9% as a huge number that will push year-over-year inflation well over 3%.

Concludes this means higher nominal growth and, all things equal, probably drifting higher interest rates.

Emphasizes no commensurate pullback in the real economy is expected.