(CNN)A leading Democratic economist on Wednesday urged the White House to shift course after the government reported higher-than-expected inflation last month, which has heightened fears of fresh trouble for the recovering US economy.
“Policymakers at the Fed and in the (White House) need to recognize that the risk of a Vietnam inflation scenario is now greater than the deflation risks on which they were originally focused,” former Treasury Secretary Lawrence Summers told CNN. “Whatever was the case a few months ago, it should now be clear that overheating — not excess slack — is the dominant economic risk facing the US over the next year or two.”
On the heels of a disappointing jobs report last week, the government reported consumer prices rose 4.2% in April over a year earlier, and 0.8% on a seasonally adjusted basis between March and April. Both figures exceeded earlier forecasts, just as the 266,000 April jobs gain fell far short of expectations.
The news came as Americans in the Southeast caused a fuel shortage by panic-buying gasoline in the days after a cyberattack caused the Colonial Pipeline to shut down. The pipeline, which supplies a large portion of the East Coast’s fuel, was restarted Wednesday afternoon.
Summers, a top economic adviser to former Presidents Barack Obama and Bill Clinton, warned earlier this year that Biden’s $1.9 trillion Covid relief bill might overstimulate and damage the economy by sparking excessive inflation. Biden aides responded that, while they were monitoring inflation risks, the danger of spending too little to recover from the effects of the pandemic exceeded the risks of spending too much.
The White House continued to publicly downplay inflation concerns on Wednesday, saying the new data reflects pent-up
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