As Food Prices Rise, Fed Keeps a Watchful Eye; Central Bank Officials Sometimes Look Past Food-Cost Increases
U.S. food prices are on the rise, raising a sensitive question: When the cost of a hamburger patty soars, does it count as inflation?</br></br>It does to everyone who eats and especially poorer Americans, whose food costs absorb a larger portion of their income. But central bankers take a more nuanced view. They sometimes look past food-price increases that appear temporary or isolated while trying to control broad and long-term inflation trends, not blips that might soon reverse.</br></br>The Federal Reserve faces an especially important challenge now as it mulls the long-standing dilemma of what to make of the price of a pork chop.</br></br>As Fed officials debate when to start raising short-term interest rates to prevent the economy from overheating and causing inflation, Fed Chairwoman Janet Yellen has signaled she wants to take her time.</br></br>Broad measures of inflation have been running below the Fed's 2% target for more than two years, but show signs of picking up. And the unemployment rate has fallen to 6.1% from 7.5% a year ago, which suggests that slack in the labor market is diminishing and the risk of overheating is gradually rising.