Expects another large headline inflation increase in April, pushing headline inflation from mid-2% to ~4% in a couple months. Impact on core inflation more moderate, but raised core forecast for year by 0.3pp. Pass-through of higher energy prices to broader economy will be gradual.

Points to airfares move as first sign, expects more to come.

Consumer sentiment very responsive to gasoline prices. Energy prices moved quickly, other prices move gradually, explaining rapid deterioration in sentiment.

On monthly basis, yes real income could go negative; on yearly basis, probably not. This is a meaningful blow to real income growth. Previously expected >2% growth due to tax cuts, but higher gasoline prices and inflation will negate most of that boost. Real income likely to grow at sub-2%, ~1.5% for the year.

Doesn't expect wage pressure from this; wage growth has been coming down as labor market rebalanced.

Maintains expectation of 2 cuts for the year. Thinking evolved: at start of year, thought inflation (ex-tariffs) was low. By later in year, inflation story with/without tariffs should be similar. Still expects progress as tariff effects drop out of calculation, but to cut on schedule would probably also need some further deterioration in labor market.

Not rising unemployment, but some deterioration.