The US Federal Reserve yesterday stepped up its efforts to convince financial markets it was ready to head off any inflationary threat, with a top official saying recent price rises required careful scrutiny.
Mr Jack Guynn, president of the Atlanta Federal Reserve, indicated the Fed may have to raise interest rates more aggressively than had been planned if inflationary pressures mounted.
"Recent developments on the price front warrant significant attention in our analysis and policy debate," he said.
Mr Guynn's remarks were the latest in a string of hawkish statements from top Fed officials this week. They reinforced the perception in the market that the attention of monetary policy makers had shifted decisively from promoting growth to preventing a rise in inflation.
Earlier this week, Fed chairman Mr Alan Greenspan warned that if the outlook for inflation deteriorated interest rate rises would be less gradual than had been expected.
Mr William Poole, president of the St Louis Fed, said a rise in inflation was now more likely than a fall. Both private sector economists and the Fed have been taken aback by the swift climb in inflation recently.
In the three months to April the annualised rate of consumer price inflation excluding volatile food and energy accelerated to 3.3 per cent, compared with 0.8 per cent in the three months to December.
Market attention is now focused on the release of consumer price data for May on Tuesday, which is expected to show prices have been pushed higher by rising petrol prices.
Following its decision to keep rates on hold at 1 per cent last month, the Fed said the pace of monetary tightening was likely to be measured.
But Mr Guynn said yesterday the word "measured" was "more of a plan than a pledge". "I would not want our most recent ... statement to be construed as a rigid pre-commitment to any particular path."
Some economists believe the Fed has left it too late to keep inflation in check and may have to move rates higher more abruptly as a result.
"It is clear that there is now a concerted campaign by the Fed to show that they are on top of inflation and have not become complacent," said Mr Nigel Gault, director of US research at Global Insight, an economic consultancy.
