Fed Faces Credibility Crunch

After the Labor Department reported a surprising jump in core inflation Wednesday morning, the afternoon revelations that the FOMC discussed using more dovish language at its January policy meeting felt like reading last week's newspaper.

It turns out many investors were not so wrong last month to believe that the Federal Reserve would remove its tightening bias at the January FOMC meeting. The minutes released Wednesday reveal that the members debated such a possibility.

But the moment for dovish rhetoric was fleeting, as the consumer price index data and a commodities rally suggest the inflation dragon is nowhere near slain. Rising inflation amid slower growth puts the Fed and Chairman Ben Bernanke in a most-loathsome pickle -- how to retain credibility without killing the economy. ...