We're in multi-dimensional framework with layers of supply shocks (tariffs, immigration, AI, Middle East). Inflationary pressures more persistent than anticipated; this shock has longer tail than quick spike.

Focus on core PCE ending year at 3%, well above Fed's 2% objective. Fed will be on hold; minutes show they consider it prudent to await more data on Middle East conflict.

Most persistent price pressures from goods segments where tariffs passing through. Energy shock will filter to transportation, fertilizer, crop and food prices - layered shock causing income squeeze.

Consumer increasingly under pressure from negative wealth shock and income squeeze. Real disposable income growing 1% vs spending at 2.5% - gap financed by savings, credit, wealth which aren't infinite.

Job growth close to zero, wage growth easing - key question for income sustainability.

Oil price shock hit households by $350 vs tax refunds up $290 - negative gap. Lower income families more sensitive to oil prices, less likely to receive tax refunds.

Fed will look at mandates: inflation further from 2% target and moving wrong direction, employment close to maximum. Will err on inflation as greater downside risk, maintain marginally restrictive stance.

Next rate move is no move for foreseeable future; we have rate cut in December but for bad reasons (labor market not as strong).

Labor market very delicate - supply down significantly but also significant cut to labor demand. Job growth numbers will hover around zero, could be positive or negative any given month.

Underlying pace of economy is slower.

Oil prices not back to $60 but potentially closer to $75-80 by year-end. Even with ongoing negotiation/ceasefire, risk premium of $10-15 through end of year.

Slow rolling process.