Is inflation in the United States reigniting? "Whistleblower" warns again after four years: Fed's rate cuts may have ended, next step could be raising rates.

Four years ago, former US Treasury Secretary Lawrence Summers criticized US fiscal and monetary policymakers for excessively stimulating the economy, warning that it could trigger the most serious inflation in a generation. Now, he warns that there is a danger of price pressures erupting once again. He urges the Federal Reserve to remain vigilant against price pressures and believes that the current cycle may not involve further interest rate cuts, but rather the possibility of hikes. Summers stated, "This may be the most sensitive moment of inflation escalation that we have experienced since the serious inflation caused by policy mistakes in 2021." Summers pointed out signs of tightness in the job market, including last week's announcement of January non-farm employment data showing significant wage increases, providing a backdrop for a potential consumer price rebound even before the new government takes any action. Since that data point, President Trump has increased tariffs on Chinese imports and threatened to increase a range of other tariffs. Summers said, "Now is a moment even before policy is issued from the White House when we must be very careful about inflation." Federal Reserve Chairman Powell reiterated on Tuesday at a Senate hearing what he had said last month, that the Fed does not need to rush into rate cuts after lowering the benchmark rate by 1 percentage point in the final months of 2024. Summers said, "It's not a possibility, but at this point, the Fed's next move is likely to be a rate hike, not a cut. This is a particularly dangerous moment for any form of cost shock, any form of damaging inflation credibility, any form of irresponsible fiscal measures." Summers warned at the beginning of 2021 that President Biden's $1.9 trillion fiscal plan could exacerbate inflation, causing some Democrats to feel uneasy. He also criticized the Fed for not paying enough attention to price risks. Powell admitted in March 2022, "In retrospect, we should have acted earlier" on raising rates. In contrast, Biden's team continues to defend their actions. Former Treasury Secretary Janet Yellen believes the bigger mistake was not doing enough, ultimately leaving the labor market scarred for years. Today, many economists warn that Trump's expulsion of undocumented immigrants and efforts to strengthen border control could add pressure to the labor market. Tariff increases could also lead to at least one-time price hikes, if not sustained increases. The January non-farm employment report in the US showed an increase of 143,000 jobs, below the median forecast of economists. However, Summers pointed out that revised data showed 100,000 jobs added in the first two months, and data adjusted for weather factors from the San Francisco Fed showed over 200,000 new non-farm jobs last month. The former Treasury Secretary said, "This is faster than the economy can normally absorb, especially considering the immigration issue. So, significant wage increases are not surprising." Average hourly wages for the month increased by 0.5% compared to December of the previous year, exceeding all expectations. He also noted that a survey from the University of Michigan showed an increase in inflation expectations. On Monday, another survey from the New York Fed also showed an increase in inflation expectations.