US Federal Reserve officials are likely to reiterate that inflation is their
predominant concern when they meet next week, even though inflation recently
edged lower, The Wall Street Journal reported yesterday.
Fed officials are scheduled to meet on May 9 and are likely to leave their
target for short-term interest rates at 5.25 percent, said the report.
Officials at the central bank also still see risks to growth, especially from
weakness in business investment and housing, but those risks do not appear to
have grown in the past month, it said.
According to Fed officials, said the report, there are still potential
obstacles to further declines in inflation, such as a rebound in energy prices,
a drop in the dollar and, most important, the failure of unemployment to rise as
expected.
The April employment report, due Friday, will show whether the long-expected
weakening in U.S. job markets has begun.
The report said the Fed is wary of inflation for several reasons. First, with
core inflation, which excludes volatile energy and food, at or above 2 percent
for three years now, the central bank is inclined to see any move up from
today's level as far more consequential than a move lower.
A second reason is that the Fed sees several risks that could send inflation
higher. The leading concern is that even as the economy has slowed, unemployment
has kept failing.
"With labor markets appearing to have tightened further, rather than easing
as expected, the upside risks to inflation have gotten bigger," Federal Reserve
Bank of San Francisco President Janet Yellen was quoted as saying.