'Timely Manner'
A minority of Fed officials are concerned that the Fed's record balance sheet risks igniting dangerous price increases. A failure to exit "in a timely manner could have serious consequences for inflation and economic stability in the future," Philadelphia's Plosser said in a March speech.
"Should it prove necessary to counter inflationary pressures, I will be among the first to advocate the unwinding of some of the stimulus we have provided," Fisher said May 4.
Any interest-rate increase may still be far off, as the threat of rising expectations receded this month, giving the Fed breathing room. "You've got global uncertainties, some of which are abating, commodity prices moving off their peaks and oil prices drifting down, so I think that's helpful," Bullard said in an interview May 18.
'Transitory' Inflation
While the FOMC reiterated its view in the April 27 statement that the boost to inflation from higher commodity prices will be "transitory," Fed officials must be careful not to assume both food- and energy-price increases will dissipate and have little persistent effects on inflation, Davig said in an interview.
"Food prices have a tendency, when they go up, to be more persistent, and we do see that spillover from higher food prices into longer-term measures of inflation," he said.
The attention the Fed pays to inflation expectations means investors, whether they agree with the central bank or not on the measures' importance, must pay attention themselves.
"The Fed absolutely does believe that inflation expectations matter," said Steve Lear, who helps oversee $130 billion as deputy chief investment officer at J.P. Morgan Asset Management in New York. "Needless to say, we care because the Fed cares."