Economists are rapidly revising their rate hike forecasts for the Federal Reserve after the consumer price inflation print last week came in at 8.6% on the year. They now expect half-point hikes at the policy meeting this week, followed by another half-point in July, after the half-point increase in May and a quarter-point in March.

The monthly CPI increase was a full 1%, which annualized into a 12% rate. Core CPI, which excludes food and energy, rose 6% on the year and 0.6% on the month.

For some economists, this means the Fed will have to continue half-point increases through September. There is even talk of a three-quarters point hike along the way, though the Fed has ruled that out in the past.

Surging inflation is putting central bankers on the spot because their main task is to prevent inflation. Both Fed Chairman Jerome Powell and his predecessor, Treasury Secretary Janet Yellen, have issued mea culpas about how badly they misjudged inflation, but that doesn’t halt the rise in prices.

There is a growing question of whether the planned action will be enough. Mohamed El-Erian, chief economic advisor at Allianz and former CEO at PIMCO, said Sunday that the current surge could have been avoided if the Fed had shown more humility about its misjudgment and acted sooner.

At this point, the US central bank faces a big challenge in catching up and restoring its credibility, while heading off long-term inflation expectations. A recession, throwing perhaps millions out of work, is coming to be seen as more likely.

The Atlanta Fed’s GDP tracker showed second-quarter growth last week slowing to a 0.9% annual rate from 1.3% the previous week, suggesting a slowdown that could result in the second quarter of negative growth—the technical definition of a recession.

Even without a recession, or only a mild one, many economists are now expecting a period of stagflation—high inflation and low growth—that could last at least a couple of years.

In the meantime, the White House is now talking about how the Fed needs “space” to operate, ostensibly acknowledging the independence of the central bank. But for some market participants, it seems increasing like the administration is setting up the Fed to be the fall guy in failing to contain inflation.

Muddled ECB Inflation Messaging

European Central Bank President Christine Lagarde is betraying her lack of monetary policy experience as Europe faces its own inflationary pressures and is oddly resistant to doing anything about it.

Consumer prices in May rose by 8.1% on the year in the eurozone, far above the 2% target of the central bank.

Former ECB chief economist Peter Praet, last week, took Lagarde to task for what he sees as muddled messaging, first talking up very gradual rate hikes and then, last week, coming out with more hawkish views as the ECB pledged to start raising rates in July.

“What really annoys me in the communication first is that Christine Lagarde deviated from what she said a few weeks ago,” Praet said in an interview with Bloomberg Television.

In a May 23 blog, Lagarde said rate hikes would be gradual because there was no excess demand in the eurozone. Last week, she changed her tune and forecast not only to a quarter-point rate hike in July, but also another increase in September, by a half-point if necessary.

“If you want to be a hawk, then you have to be consistent and say what you want to achieve,” the former chief economist said.

He also criticized Lagarde for not being clear about what the ECB would do if bond spreads widen between stronger and weaker economies in the eurozone—a problem peculiar to trying to keep a joint currency with 19 sovereign governments, following their own borrowing needs.