ATLANTA, Jan. 8 (UPI) -- The Federal Reserve is still on guard about inflation as the 2007 U.S. economy moves toward moderate expansion, a top Fed official said.
"It is still too early to relax our concerns about whether the run-up in price pressures in the spring and summer of last year is truly unwinding," Fed Vice Chairman Donald Kohn told the Rotary Club of Atlanta. It is also too early to know if inflation is slowing "rapidly enough to forestall a pickup in inflation expectations."
Kohn, the Fed's most influential policy maker after Chairman Ben Bernanke, cautioned against "extrapolating trends from a couple of months of data," saying some of the recent slowdown may reflect "one-time influences," in particular a big drop in energy costs.
Kohn's remarks suggested little had changed in the central bank's outlook since its December meeting, The Wall Street Journal said. At that meeting, when it kept its short-term interest-rate target at 5.25 percent, it said its principal concern was inflation and its main choice in coming months was whether to raise rates or leave them unchanged.
