Harvard economist Gita Gopinath is warning that the U.S. economy could face another inflation flare-up this year—one that policymakers and markets may be too quick to dismiss.
Speaking with Bloomberg TV at the World Economic Forum in Davos, Gopinath cautioned that “we may be underestimating what inflation could do in 2026.”
The former first deputy managing director and chief economist of the International Monetary Fund said she sees several forces that could push prices higher again, despite recent cooling trends. While productivity gains offer some relief, Gopinath pointed to expansive fiscal stimulus—including tax breaks from the Big Beautiful Bill Act—along with heavy corporate spending on artificial intelligence, higher utility infrastructure costs passed to consumers, continuing tariff impacts and a weakening dollar as potential drivers of renewed inflationary pressure.
According to Gopinath, bond markets will ultimately factor in these risks. The yield on the 10-year Treasury note has been climbing in recent weeks, signaling that investors expect higher inflation ahead and want bigger returns to hold U.S. debt.
“Regardless of what the central bank position is going to be, the long end of the yield curve will go up,” she told Bloomberg. “Either they raise interest rates and that causes the long end to go up, or this is too dovish a central bank, inflation is going to be higher, that causes the long end to go up.”
Even as Gopinath highlights the threat of resurgent inflation, other economists remain more optimistic. The Wall Street Journal’s latest quarterly survey found that U.S. economic momentum held up far better than expected in 2025, with real GDP growth estimated at 2.3% compared with earlier forecasts of just 0.8%. Rising stock prices buoyed upper-income households—who account for nearly half of all consumer spending—and helped sustain overall demand, which makes up roughly 69% of GDP.
Yet, some economists see even a darker undercurrent. Adam Posen, president of the Peterson Institute for International Economics, argued in Bloomberg that “many forecasters and investors misinterpret what is happening in the American economy.” He wrote that the optimism stems from “a fundamental misunderstanding of how government-induced uncertainty affects the economy,” warning that even the AI investment boom cannot offset bigger structural risks.
Posen contended that it has been at least a century since an administration has generated as much economic uncertainty as the current one. He wrote that the “stagflationary effects of Trump’s policies are kicking in and should become too evident to miss as we approach April 2, the first anniversary of his so-called Liberation Day”—a reference to an economic mix of weak GDP growth, rising unemployment and elevated inflation.
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