When Russia invaded Ukraine, it sent a commodity shockwave. I was on Team Transitory, which was wrong. We raised rates aggressively partly because of that shock. Now, with recent events, the question is: will this look more like Russia-Ukraine (major shock) or more like Hamas-Israel (limited shock)? It's too soon to know the imprint on inflation.

Energy eventually affects core goods and services, but that process takes a while. The bigger issue is if headline inflation stays elevated for an extended period after five years of high inflation. We must watch long-run expectations.

Coming into this moment, I was feeling pretty good. Inflation is slowly heading right, labor market is good but softening. Policy was in a good place to glide back to neutral. Now we need to see how long and how big this new shock's effect is.

The ruling introduces uncertainty, which is a drag. I haven't seen evidence the new tariff regime will lead to a new round of elevated inflation. The administration wants to recreate previous tariffs. I don't see scenarios for substantially higher tariffs, so I don't expect it to delay the expected deceleration of inflation.

In December, I had one dot for 2026, meaning one expected cut later this year. Housing inflation is trending down. Core goods up due to tariffs. Services inflation slowly trending down with the labor market. That gave me confidence for one cut. Now, with geopolitical events, we need more data.

We have to hit it for credibility. The neutral rate is a big question. The economy's resilience suggests the neutral rate must be higher, at least in the near term.

They feel more balanced, setting aside recent events. An anecdote from North Dakota suggests less underlying organic demand for labor. I balance that against inflation still being too high but gently trending down.

It's domestic/global uncertainty and finding they can get by. Virtually every large business is using AI in specific pockets, doing things more efficiently. This affects hiring decisions early in the adoption phase.

AI is massively capital intensive. The economy reallocates capital through higher rates. Long-term, AI could lower the neutral rate. In the near term, it's probably pushing it up. In the 90s, Greenspan held rates at about 5% during a productivity boom; we're well below that now.

Most common comment: expected repricing at start of year after passing on costs last year. Seeing some continued pass-through, but not hearing of major new inflation waves. It's a slow adjustment to last year's tariffs.

Somewhat lower by year-end. Housing inflation trending down confidently. Core goods inflation should be short-lived unless new tariffs. Core services tied to wages should come down with labor market. That gave confidence inflation was heading right before recent events.

Had a lot of confidence until a couple days ago. Now back to the core question: does this look more like Russia-Ukraine or Hamas-Israel? I don't know yet. We need to wait and see.