(Bloomberg) -- Former Treasury Secretary Lawrence Summers said that persistent inflationary pressures evident in the latest data suggest that there’s potential for the next Federal Reserve policy move to be to raise interest rates, not lower them.

“There’s a meaningful chance — maybe it’s 15% — that the next move is going to be upwards in rates, not downwards,” Summers said on Bloomberg Television’s Wall Street Week with David Westin. “The Fed is going to have to be very careful.”

Summers spoke at the end of a week that saw hotter-than-expected readings on consumer and producer price indexes for January, which spurred traders to scale back bets on Fed rate cuts in coming months. A key subset of services prices advanced by the most in nearly two years, data showed on Tuesday.

“It’s always a mistake to over-interpret one month’s number — and that’s especially true in January, where calculating seasonality is difficult,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. “But I think we have to recognize the possibility of a mini-paradigm shift.”

He noted that a major expectation among economists for some time has been that housing costs would become a significant deflationary factor in overall price measures, but that has yet to materialize. Setting rental units aside, the cost of owner-occupied houses doesn’t show a deflationary picture, and may keep up price pressures through the remainder of 2024, Summers said.

“That’s not the only disturbing indication,” he said. Another key concern is core services prices — which leave out food and energy costs — excluding housing, which have been pushed up by higher wages. “It sure looks like super-core was explosive in January,” he said in reference to that measure.

The core CPI climbed 3.9% in January from a year before, well down from the 2022 peak of 6.6%, and above levels that would be consistent with the Fed’s 2% target, using a separate inflation gauge.

“The assumption that inflation was headed down to 2% in a tranquil, healthy, real economy has certainly been called into question by these data,” Summers said of this week’s figures.

As for when the Fed might be able to cut rates, he said, “May is odds-off at this point. And probably should be odds-off.”

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