Forget tariffs and the Iran oil shock—a top economist says the Fed is blind to the real inflation threat

Kevin Warsh, U.S. President Donald Trump's nominee for Chair of the Federal Reserve, is sworn in to testify during his Senate Committee on Banking, Housing, and Urban Affairs confirmation hearing in the Dirksen Senate Office Building on April 21, 2026 in Washington, DC. (Credit: Andrew Harnik - Getty Images)

The distressing inflation data just released raises the crucial question on whether all the good things we’re seeing in the economy—from a confident, big spending consumer to the roaring stock market to an explosion in capex for AI—can keep driving ahead. Is the surge in prices, and big rise in bond yields it’s triggered, really a temporary trend caused chiefly by the Iran war oil shock and the lingering pressure from the Trump tariffs?

That’s the relatively optimistic stance just-exiting Fed Chairman Jerome Powell’s been taking. But a top monetary economist believes that Powell totally misread the signals, and that if the Central Bank doesn’t act fast, we could see a near-repeat of the inflationary scourge of 2021 and 2022. “Powell’s been saying the same thing he said then,” says William Luther, an associate professor at Florida Atlantic University. “He’s blaming everything on ‘transitory’ forces again, without using that word, just like he blamed inflation back then on supply chain disruptions. They weren’t the main problem then, and the tariffs and higher oil prices aren’t the chief culprit now. Even if those problems recede and nothing else changes, we won’t solve the inflation issue. The Fed needs to address the root cause. And that’s huge excess spending in the overall economy.”