Fed Keeps Heat On

Since future Fed policy remains fluid, commentary by voting members of the FOMC has taken on added significance. Ben Bernanke, whose congressional testimony in late April wrongly convinced financial markets that a "pause" was imminent in the rate hike campaign, spent much of the last two months in a hawkish public posture.

Bernanke's most significant commentary came on June 5, when he told a banking conference in Washington that inflation readings "have been higher in recent months" and "are unwelcome." At the same time, Bernanke noted a slowdown in consumer spending, raising fears of stagflation and sending the Dow down 199 points in one day.

Economic data in the intra-meeting period has also been troublesome. On June 14, the Labor Department said its consumer price index rose 0.4% in May, including a 0.3% rise in its core components. Compared with May of last year, the rate of gain in the core index was 2.4%, slightly above the Fed's comfort zone of 2%.