How Many More Inflation Shocks Can the Fed Ignore?

Investors were largely unmoved by last month’s increase in consumer prices, even though it was the biggest in almost four years. They saw it coming and think it won’t last. They expect the Federal Reserve to hold interest rates steady for the next few months, standing by its policy of “wait and see.”

The central bank would doubtless like to oblige. Trouble is, yet another “temporary” rise in inflation might leave households and businesses much less sanguine — and their reaction will surely complicate the Fed’s decisions.