Former US Treasury Secretary Summers warns: inflation may spiral out of control, current Fed rate-cutting cycle may have ended

Former U.S. Treasury Secretary Lawrence Summers has once again issued a warning, pointing out that the United States is facing the most sensitive moment of inflation heating up since 2021. The Federal Reserve may no longer cut interest rates in the current Interest Rate cycle and there may even be a possibility of raising rates. (Previous summary: Powell is hawkish: Fed 'not in a hurry to cut interest rates', BTC briefly falls below $95,000, key points of the hearing) (Background supplement: Warning of major fluctuations! Powell will deliver annual monetary policy speech to Congress tonight, will there be changes in the Fed's rate cuts?) Following his criticism in 2021 that excessive stimulus in the United States could trigger the most severe inflation in history (and later confirmed to be correct), former Treasury Secretary Lawrence Summers reiterated his warning today, pointing out the looming risk of prices spiraling out of control once again. Former U.S. Treasury Secretary: The current rate-cutting cycle may have ended. Summers warned that current inflation is facing the most sensitive heating up period since the inflation triggered by policy mistakes in 2021. He emphasized that even without considering the White House's new policies, there is still a need to remain highly vigilant about inflation at this stage. Summers urged the Federal Reserve to continue its stance against inflation and believed that in the current Interest Rate cycle, there may not be further room for rate cuts, and there may even be a possibility of raising rates again. He bluntly stated: 'This is not an absolute certainty, but there is indeed a very realistic possibility that the Fed's next move may be a rate hike rather than a cut.' He added that it is a particularly vulnerable period now, and any cost shocks, remarks that are detrimental to market confidence in combating inflation, or fiscally irresponsible measures, could further heighten the risk of inflation. Inflation pressure stems from wages rising above expectations. Summers believes that inflation pressure is brewing because there are signs of tightening in the U.S. job market. He pointed out that wages rose significantly in the January employment report, laying the groundwork for future consumer price rises, and this is not yet taking into account the impact of new government policies. After the data was released, Trump raised tariffs on Chinese goods, steel, and aluminum, and threatened further escalation, which could further increase price pressures. Although the January employment report showed an increase of 143,000 non-farm jobs, below market expectations, Summers pointed out that after the data for the first two months was revised, 100,000 jobs were added, and estimates from the Federal Reserve Bank of San Francisco after adjustments indicated that there were over 200,000 actual new jobs last month. Summers said: 'This growth rate exceeds the normal absorption capacity of the economy, especially in the current tightening immigration policy, so a significant rise in wages is not surprising.' Data shows that average hourly wages rose by 0.5% in January, higher than all expectations. In addition, Summers mentioned a survey by the University of Michigan which also showed that market expectations for inflation are rising, further exacerbating concerns about the risk of price increases. Powell: The Fed is not in a hurry to cut interest rates. Summers believes that the Fed's view that it may not cut interest rates aligns with the statement made by Fed Chair Powell at a Senate hearing yesterday (11). Powell said that due to the good performance of the U.S. economy, the Fed is not in a hurry to further cut interest rates: 'Given that our current policy stance is less constrained than before and the economy remains strong, we are not in a hurry to adjust monetary policy.' Looking ahead, Powell pointed out that if the inflation rate cannot further decline to the target level and the economy remains robust, the Fed may maintain the Interest Rate unchanged for a longer period. Conversely, if there is unexpected weakness in the labor market or if the inflation rate falls to the 2% target faster than expected, the Fed may consider cutting rates. The difference is that Summers is concerned that wage increases may push up inflation pressure, while Powell believes that the current U.S. job market is generally balanced and not the main driver of inflation. For more information: Powell is hawkish: Fed 'not in a hurry to cut interest rates', BTC briefly falls below $95,000, key points of the hearing Related reports: BTC plunges after hitting $94,700, Trump announces 25% tariff on all imported steel and aluminum From diamond hands to meme stocks, how can highly fragmented markets survive? Two Fed hawks change their attitude towards Crypto, Polymarket predicts a 43% increase in the probability of the U.S. holding BTC reserves 'Former U.S. Treasury Secretary Summers Warns: Inflation out of control may erupt again, this round of Fed rate cuts may have ended' was first published on BlockTempo, the most influential blockchain news media in Block.