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Donald Kohn, a Fed veteran and perhaps the governor who is closest to Mr Greenspan, made clear in a speech earlier this month that much of the inflation acceleration in early 2004 was a rebound from "unexplainably low inflation last year" as well as the one-off effect of higher prices for energy and other commodities as well as a weaker dollar.
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Dark energy, dark matter, inflation and punctuated acceleration: it's all too much.
If, on the other hand, the rise in interest rates occurs endogenously as an integral part of an improving economic situation featuring a pick-up in growth and inflation, with an acceleration in nominal income growth broadly matching the interest rate increase, debt dynamics would hardly be affected.
"So far we do not see evidence yet of a significant acceleration in inflation," he said.
The Fed is aiming to end a recent acceleration in inflation, caused in part by the economy's growth.
Goldman Sachs said in a research report that while the acceleration of inflation was "notable," there were a few encouraging signs.
By comparison, growth of 9.6percentt in the second quarter of 2004 ignited a broad acceleration of inflation then.
Bond prices rose sharply yesterday after a government report on consumer prices for May showed no acceleration in inflation.
"The risks are all toward a gradual acceleration of inflation," said Jan Hatzius, an economist at Goldman , Sachs
At this point the short-run priorities are twofold: sustaining the expansion and preventing an acceleration of inflation.
Retail rice prices have already jumped by as much as 60percentt in recent months in Vietnam, trailing increases in wholesale prices but leading a broader acceleration in inflation.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com