Fed warns of yet more rate rises

Alan Greenspan has been closely watching the inflation picture

US interest rates look set to keep rising after the Federal Reserve said the current 2.5% level may be too low to keep inflation in check.

The comments came in Wednesday's release of the minutes from the last Fed rates meeting on 1 and 2 February.

Although at that meeting the Fed voted to raise rates by 0.25% to 2.5%, it said they may have to continue to rise, at least over the medium term.

It added that the rate of the increases would be dependent on continuing data.

'Tough talk'

Rates were "generally seen as remaining below levels that might reasonably be associated with maintaining a stable inflation rate over the medium term," the minutes said.

The Fed has previously said that future rises would be "measured".

John Shin, senior economist at Lehman Brothers, said the Fed was being deliberately "hawkish".

"We still think there will be a 25 basis points (rise) a meeting for the next four meetings," he said.

The Fed's interest rates rise at the start of this month was its sixth consecutive 0.25% increase since last June.

Mixed figures

The latest official data that the Fed can use to gauge the inflationary picture has been somewhat mixed.

Last Friday fears of increased inflation rose after a surprise 0.8% jump in US wholesale prices.

Yet earlier on Wednesday, the latest consumer price data made much better reading for the Fed.

The Labor Department said US consumer prices rose by just 0.1% in January.

Excluding volatile food and energy costs, the core Consumer Price Index (CPI) inflation figure increased by 0.2% for the fourth month in a row.

Analysts had expected both figures to be 0.2%.