Wall Street is now split into two camps: One side sees oil prices breaking $100 and inflation picking up, cutting rate-cut expectations from two cuts down to one, pushing action to December. The other side is Morgan Stanley, refusing to change course: first cut in June, another in September.

Who's right? Morgan Stanley's Chief Economist Gapen has solid logic: Oil prices at $90-100, the economy can handle it. If it really can't, you'd need $125-150 sustained for a while, which would actually require the Fed to step in with a rescue.

The key indicator is the 1-year inflation swap rate, currently around 2.5%. If it turns downward, it signals the market is shifting from "fearing inflation" to "fearing demand collapse," and rate-cut expectations would immediately reignite.