Larry Summers thought inflation could rise quickly - but not this quickly

• Former Treasury Secretary Larry Summers said inflation is surging faster than even he had worried.
• He said April inflation - the strongest jump since 2009 - "has to make us nervous going forward."
• On the other side of the inflation debate, the Fed maintains stronger inflation will be temporary.

For someone who's been warning of rampant inflation for much of 2021, it would take a blowout report to rattle former Treasury Secretary Larry Summers.

Data published Wednesday seems to have fit the bill.

The Consumer Price Index - among the most popular gauges of broad inflation - rose 0.8% in April, trouncing the 0.2% estimate and marking the largest month-over-month jump since 2009.

The acceleration in price growth is worthy of concern, Summers said Friday, adding the data surpassed even his own projections.

"I was on the worried side about inflation and it's all moved much faster, much sooner than I had predicted," Summers said on Bloomberg TV. "That has to make us nervous going forward."

Summers has been among the loudest voices calling on the Biden administration and the Federal Reserve to pull back on policy support amid concerns of an inflation crisis. He characterized Democrats' $1.9 trillion stimulus plan as the "least responsible" fiscal policy he'd seen in four decades. The idea that inflation can't suddenly spiral out of the Fed's control "is just plain wrong," he said in March.

The former Treasury Secretary's comments could even lift inflation on their own, because price growth is somewhat guided by expectations. When people anticipate prices will climb faster, businesses tend to lift selling prices and workers ask for higher wages. Inflation expectations are already elevated, and chatter from Summers and other inflation hawks could stoke such fears even more.

On the other side of the inflation debate, the central bank is holding strong in its belief that stronger inflation will be transitory. Richard Clarida, the Fed's vice chairman, said Wednesday that, despite the surprising April data, price growth should still cool and trend near the central bank's 2% target over time.

"We have pent-up demand in the economy. It may take some time for supply to rise up to demand," he added in a Wednesday speech.

Summers rebuked the central bank's forecast, noting that the April jump suggests dangerous inflation remains a potential outcome.

"I don't think you can dismiss these figures," he said. "The Fed seems to be planning for a very benign scenario that we certainly can't count on."

Still, economists at major banks have largely agreed with the Fed's outlook. Bottlenecks and supply-chain disruptions plaguing US manufacturers are contributing to stronger price growth, but the issues will fade as the economy rebounds and policy support remains, JPMorgan said in a recent note.

Americans should brace for even higher inflation numbers, but they can rest assured the boost will be temporary, Jan Hatzius, chief economist at Goldman Sachs, said in a Tuesday appearance on Bloomberg TV. Factors that contributed to the April jump, such as higher service prices and easier year-over-year comparisons, suggest strong inflation will settle at the Fed's target relatively soon, he added.

"A lot of that is pretty short-term," Hatzius said. "It doesn't really tell you a lot about inflation in 2022 when we think we'll probably be back to about 2%."