Risk of a New Wave of Inflation in the USA?

In an environment where most economic forecasters are optimistic about the resilience of the economy, the macro research institute TS Lombard warns of a potential scenario of increased inflation that could parallel the stagflation crisis of the 1970s. This phase, in which economic growth stagnated and inflation remained persistently high, posed a particular challenge for policymakers as it significantly constrained conventional monetary measures like interest rate cuts. TS Lombard's Dario Perkins points out that the Federal Reserve might resort to premature interest rate cuts. These could have negative consequences at a later stage, as they begin at a time when wage agreements could keep inflation above the Fed's target. Although this is seen by most analysts as a marginal risk, there are signs that the Fed's recent interest rate adjustments are being critically observed by some market participants. An increase in the probabilities that the central bank will keep its interest rate scale unchanged reflects strong GDP figures and surprisingly positive developments in the labor market. Perkins warns that the combination of interest rate cuts, supply shocks, and political influence on monetary policy could point in a potentially dangerous direction. An unexpectedly renewed increase in demand could further fuel inflation if the Fed continues to pursue an expansionary course. Nevertheless, the majority of economic forecasters remain of the opinion that neither a recession nor full-fledged stagflation is imminent. The stability of the US economy casts doubt on the flexibility of the Fed to significantly change its monetary policy course.