NO STATEMENT from the Federal Reserve is complete without a promise to make decisions based on the data. In each of the past two years, a souring outlook for the world economy prompted the Fed to delay interest-rate rises. And quite right, too. Yet if the Fed raises rates on June 14th in the face of low inflation, as it has strongly hinted, it would bring into question its commitment both to the data and also to its 2% inflation target.
The central bank has raised rates three times since December 2015 (the latest rise came in March). It is good that monetary policy is a little tighter than it was back then. The unemployment rate, at 4.3%, is lower than at any time since early 2001. A broad range of earnings data show a modest pickup in wage growth. The Fed is right to think that it is better to slow the economy gradually than be forced to bring it to a screeching halt later, if wage and price rises get out of hand. The rate increases to date have been reasonable insurance against an inflationary surge.