Michael Gapen

Headline and core.

Core is X energy and X food because these are commodities determined in global markets.

And core kind of gives us a view of where underlying inflation trends may be going.

And the data history in the U.S.

I mean, this goes back 30 to 40 years now where shocks to oil tend to push headline inflation higher in the U.S.,

But it often has very limited second-round effects on core.

That's important from the economist's point of view because you're saying, okay, we get the direct effect from energy.

We can't avoid that.

It goes right into gasoline prices very quickly in the U.S.

But the good news is history says we don't get second-round effects.

where other prices rise because gasoline prices are higher or oil prices are higher.

So we've raised our forecast for headline inflation.

We actually think headline inflation will peak around 3.7% on a year-on-year basis.

So there's still probably a little more to come in that regard.

But we really haven't changed our outlook on core inflation.

We think core inflation can actually move a little lower as we get into the second half of the year.

That will be dependent, though, I think primarily on whether the tariff pass-through to goods prices ends.

We think it will by the middle of the year.

But that's how we're looking at it.

It's a boost to headline inflation, but it may not change the underlying dynamics of inflation, and inflation could be lower by the end of the year.