Why $200 Oil Won’t Spike Inflation to 9% | Anna Wong on Recession Probability, PCE vs CPI, and Fed Reaction Function In A Scenario of Soaring Energy Prices

The conversation centers on whether rising oil prices will trigger a resurgence of inflation akin to 2022. Anna Wong, Chief U.S. Economist at Bloomberg, challenges the notion of inflation reaching 7-9% again, even with oil prices potentially hitting $200 per barrel. She argues that significant second-order effects, such as unanchored inflation expectations and widespread commodity inflation, would need to occur, which she deems unlikely given the current macroeconomic conditions. Wong suggests that demand destruction is more probable, with consumers cutting back on discretionary spending as energy costs rise. She also highlights the divergence between core CPI and PCE inflation measures, attributing the gap to factors like financial services and healthcare premiums, which she believes are transitory.