“The Federal Reserve received some further cause for discussion at its policy meeting this week with a report of a surprising jump in consumer inflation.
Yet most economists aren’t altering their view that the Fed’s first interest rate increase is at least a year away. Analysts cautioned that that time frame could change if inflation were to accelerate. The consumer price index rose 0.4 percent in May, the government said, and has risen 2.1 percent over the past 12 months — roughly at the level of the Fed’s target rate for inflation.
It’s why the Fed might actually welcome the news of slightly higher inflation: It will help ease long-standing concerns that inflation might be too low. For the past two years, inflation by one key measure has remained under the Fed’s 2 percent target.
“I don’t think the Fed is going to express concern about the May price increase,” said Joel Naroff, chief economist at Naroff Economic Advisors.
When the Fed issues a statement Wednesday after its meeting ends and updates its economic forecasts, and then Chair Janet Yellen holds a news conference, investors will be seeking clues about when short-term rates will finally rise. They will also be looking for hints about how and when the Fed will start unloading its vast investment holdings…..”
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