WASHINGTON — The Federal Reserve received some further cause for discussion at its policy meeting this week with a report Tuesday of a surprising jump in consumer inflation.
Yet most economists aren’t altering their views that an interest rate increase by the Fed is at least a year away. Analysts cautioned that could change if inflation accelerates. The consumer price index rose 0.4 percent in May, the government said, and has risen 2.1 percent over the past 12 months — roughly at the level of the Fed’s target rate for inflation.
It’s why the Fed might actually welcome the news of slightly higher inflation: It will help ease longstanding concerns that inflation might be too low. For the past two years, inflation by one key measure has remained under the Fed’s 2 percent target.
‘‘I don’t think the Fed is going to express concern about the May price increase,’’ said Joel Naroff, chief economist at Naroff Economic Advisors.
When the Fed updates its economic forecasts and its chairwoman, Janet Yellen, holds a news conference after its meeting ends Wednesday, investors will be seeking clues about when short-term rates will finally rise. They will also be looking for hints about how and when the Fed will start unloading its vast investment holdings.
The answers will affect loan rates for individuals and businesses — and perhaps the direction of the economy. Yet few expect to hear anything definitive.
The Fed remains in a wait-and-see stance.
Though the central bank has signaled optimism, officials are unsure how much the economy will strengthen the rest of the year. In its updated forecasts, the Fed may downgrade its estimate of growth for 2014 after the government said last month that the economy shrank in the first quarter, depressed by a harsh winter.
The International Monetary Fund this week predicted that the US economy will grow a modest 2 percent this year, below the IMF’s previous estimate of 2.7 percent.
Yellen has suggested that the unemployment rate, now 6.3 percent, overstates the health of the job market and economy. She’s also expressed concern that a high percentage of the unemployed — 35 percent — have been out of work for six months or more and that pay is scarcely rising for people who do have jobs.
Yet the Fed is getting closer to acting. The minutes of its last meeting in late April indicate the Fed has begun discussing the tools it could use to finally pull back the extraordinary stimulus it’s provided the US economy since 2008.
This week’s meeting is the third at which Yellen will preside as chairwoman since succeeding Ben Bernanke in February. Analysts expect at least one announcement when the two-day policy meeting ends : That the Fed will make a fifth $10 billion cut in the pace of its monthly bond purchases to $35 billion, a sign of a steadily, if slowly, improving economy. The Fed has been buying Treasury and mortgage bonds to try to keep long-term loan rates low to stimulate the economy.
The Fed will likely end its bond purchases this fall, with its investment portfolio nearing $4.5 trillion. But officials have said that even when they stop buying bonds, they don’t plan to start selling any. They plan to keep the Fed’s holdings steady by re-investing maturing bonds. In doing so, the Fed will still exert downward pressure on long-term rates.