The US Federal Reserve is less likely to suspend its interest-rate increases after surprisingly high consumer inflation data for April released this week clearly struck a nerve with top Federal Reserve officials.
"Containing inflation has to be our primary focus," said Richmond Fed Bank President Jeffrey Lacker - comments that briefly tilted financial markets toward a rate hike at the June 28-29 Federal Open Market Committee policy meeting.
Lacker was the first Fed official to address the inflation issue since what many economists and traders saw as an uncomfortably high reading on core consumer prices on Wednesday.
"The inflation outlook right now is at the borderline of acceptable, and perhaps even beyond," Lacker, a voting member of the central bank's FOMC this year, told reporters after speaking to the Conference of State Bank Supervisors in Norfolk, Virginia.
St. Louis Fed Bank President William Poole, a non-voting FOMC member this year, later said at a Global Interdependence Center luncheon in Philadelphia that inflation risks were "tilted to the upside" even though he expects inflation to be contained and healthy growth to prevail.
Poole, moreover, warned the inflation problem won't necessarily go away if the U.S. economy softens, adding that the long-awaited slowdown on U.S. housing might be offset by non-residential construction activity.
Lacker said he had been disappointed with the last two monthly reports on consumer prices, which both showed core prices - the CPI stripped of food and energy - up 0.3 percent.
With crude oil prices still near $70 per barrel, the Fed will be very focused on energy cost pass-through risks to core inflation in the months ahead, he said.