Fed officials mull whether rates high enough as inflation expectations jump

NEW ORLEANS, May 10 - Debate over whether U.S. interest rates are high enough deepened among Federal Reserve officials this week, and may be stoked further after a key survey showed a jump in consumers' inflation expectations.

Many U.S. central bank officials, including Fed Chair Jerome Powell, have said they still think further rate hikes will prove unnecessary. Anchored expectations are considered by Fed officials as an important sign of the central bank's credibility, and an aid in bringing inflation back to 2%.Chicago Fed President Austan Goolsbee, in an appearance at the Economic Club of Minnesota, said a drift higher in inflation expectations"bodes awful" for further inflation progress, but the immediate results were not a concern.

"The Fed is walking a tightrope as they balance both mandates of price stability and growth," Jeffrey Roach, chief economist for LPL Financial, wrote."Although it's not our base case, we do see rising risks of stagflation," in which growth slows and price increases remain strong.

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