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Data: St. Louis Fed; Chart: Dion Rabouin/Axios Visuals

Last week's Consumer Price Index reading is putting increased focus on the Federal Reserve's laissez-faire stance, drawing concern from new critics and making old ones even more boisterous.

What we're hearing: "Data are pointing more towards higher inflation than I expected, and sooner," former U.S. Treasury Secretary Lawrence Summers tells Axios' Hans Nichols and Mike Allen. "With more inflation signs sooner than I would have expected."

  • "One should be more concerned about inflation than one was several months ago."
  • "There are many reasons for thinking that demand will increase substantially and lead to more inflation."

Background: Summers warned earlier this year that the U.S. could see "inflationary pressures of a kind we have not seen in a generation" due to rapid increases in government spending combined with the Fed's unprecedented easy monetary policy.

The big picture: Inflation worries and real-world price increases are starting to impact various parts of the economy, slowing down and even shuttering businesses.

  • In Atlanta restaurants like Waffle House have started closing their doors to customers during business hours owing to "unprecedented staffing and supply chain challenges."

By the numbers: Data last week showed the Consumer Price Index jumped 4.2% from a year earlier in April, the fastest since 2008.

  • The big jump in CPI combined with the Fed's determination to keep interest rates low has led to the lowest real Fed funds rate since 1980.

Of note: That rate doesn't account for the additional downward pressure on rates from the Fed continuing to pump $120 billion a month into markets through its quantitative easing bond-buying program announced in March 2020.

What to watch: The inflation worries hit Wall Street as all three major stock indexes had their worst week since Feb. 26 despite big gains late in the week.

  • "Not only are [last] week’s events a warning sign of how uncomfortable inflation prints can become but also a warning sign of how overbought equity markets have become," Nikolaos Panigirtzoglou, a managing director at JPMorgan, said in a note.

Where it stands: Fed vice chair Richard Clarida said Wednesday he was surprised by the CPI report, but insisted during a talk at the National Association for Business Economics conference that the central bank continues to believe high inflation readings will be temporary and that the Fed will keep its policies in place to provide support for the labor market.

The last word: "The traditional role of the Fed is to remove the punch bowl before the party gets good, right?" Summers tells Axios.

  • "They have announced that their new policy is to remove the punch bowl only after they have clearly seen a number of people staggering around drunk."

Go deeper

The business community has had enough quantitative easing

Expand chart
Data: NABE; Chart: Sara Wise/Axios

The business community’s love affair with the Federal Reserve’s unusually accommodative monetary policy may be over.

Why it matters: The Fed has signaled that it expects to soon announce plans to taper quantitative easing (QE), an emergency monetary policy program designed to keep interest rates low and bond markets very liquid.

What to make of trader sentiment

Illustration: Annelise Capossela/Axios

Traders have their eyes on COVID-19 and inflation.

Why it matters: Sentiment can drive the direction of markets in the short term as traders react to daily news headlines.

Ina Fried, author of Login
2 hours ago - Technology
Column / Signal Boost

Exclusive: Meta's civil rights chief aims to "turn the knob" for good

Photo Illustration: Shoshana Gordon/Axios. Photo: Meta

A year ago, Facebook brought in Roy Austin, Jr. to lead a new team focused on civil rights. Since then, he has assembled a squad of experts advising parent company Meta on everything from voting rights to hate speech to ensuring new products don't have discriminatory impact.

The big picture: Austin's team of nine must tackle those tough issues inside a company of nearly 70,000 employees serving more than 3 billion users around the world.