by Pedro Nicolaci da Costa
(Reuters) A steady rise in energy prices has fueled an inflationary psychology in the United States and could be a problem if it does not reverse, Federal Reserve Vice Chairman Donald Kohn said on Wednesday.
Seems this means the Fed has to act to get it to reverse- a rate hike at the June meeting will be on the table.
“Repeated increases in energy prices and their effect on overall inflation have contributed to a rise in the year- ahead inflation expectation of households,” Kohn said in remarks prepared for delivery to a conference organized by the Boston Federal Reserve Bank in Chatham, Mass.
Kohn said evidence that longer-term inflation expectations have edged up is a particular worry.
“Any tendency for these longer-term inflation expectations to drift higher or even fail to reverse over time would have troublesome implications for the outlook for inflation,” he said.