Inflation Subdued, Rate Hike Unlikely

It would be a mistake to expect an early tightening move by the Federal Reserve, given the continuing subdued behavior of inflation and uncertainty of second-half growth, top Fed sources indicated Monday.

Speaking with Knight-Ridder, the sources, who spoke on condition of anonymity, stressed that despite pockets of wage and price pressures, inflation was still surprisingly subdued.

“It all boils down to when is the evidence there to act. We’ve seen some signs (of inflation) but it’s not broad based. We see some pockets of pressures, but it’s not systematic enough to say the overall inflation rate is accelerating,” one source said.

“We’re not going to slam the brakes on growth just because we think we’re growing fast. We would do it because of inflation. You don’t see inflation,” the source added.