Odd Lots Why Adam Posen Thinks Inflation Will Surge Back to 4%
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Feb 13, 2026 
Adam Posen, president of the Peterson Institute and former central banker, presents a non-consensus forecast that inflation could hit 4% by year-end. He explains why tariffs, migration policy, fiscal easing and weakening Fed credibility could reaccelerate prices. They also discuss labor-market quirks, AI’s macro role, and how US policy shifts are reshaping Europe’s strategic choices.
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Labor Market Still Points Toward Inflation
- Adam Posen argues inflation's direction is up, not down, and could reach 4% by year-end.
- He sees labor market indicators as showing tightness and mismatch, not a demand-driven slowdown.
Policy Shocks Work With Long Lags
- Tariffs and anti-migration policies have long, lagged effects that will raise prices as businesses and workers adjust.
- Posen expects these effects to become more visible starting roughly next quarter as firms rebuild supply chains and decisions crystallize.
Midterm Fiscal Moves Could Add Stimulus
- Posen expects fiscal moves (checks and restored Obamacare subsidies) to add around 1% of GDP in deficit stimulus.
- He weights policy odds and still sees meaningful upside to demand growth from likely fiscal actions.