FED keeps close eye on inflation trend

Added On July 15, 2017

U.S. Federal Reserve Chair Janet Yellen has predicted that a strong labor market and rising imported prices could push up inflation.
Economy Report has the details.
Yellen said in her testimony to the U.S. Senate Banking Committee, quote: "It's premature to conclude that the underlying inflation trend is falling well short of 2 percent."
She said that Fed officials were cautious of the recent low inflation readings. 
Using its preferred index, the Fed said inflation increased 1.4 percent in May year-on-year. 
This is lower than the 1.5 percent in April and the 1.6 percent in March.
Yellen said the dip in inflation was probably due to "some special one-time transitory factors".
Despite the soft figures, she said "it probably remains prudent to continue on a gradual path of rate increases".
In regard to the central bank's plan to wind down its 4.5-trilllion-U.S. dollar balance sheet, Yellen reiterated that the balance sheet reduction will be conducted in a gradual and predictable way.
Market analysts now widely expected that the Fed would start to shrink its balance sheet as soon as in September.