WITH the U.S. economy humming along at its fastest clip in more than a decade, the U.S. Federal Reserve should be confident about its ability to weather a global slowdown and start lifting interest rates around the middle of next year.

    But then there is inflation.

    Interviews with Fed officials and those familiar with its thinking show the mood inside is more somber than the central bank’s reassuring statements and evidence of robust economic health would suggest. The reason is the central bank’s failure to nudge price growth up to its 2 percent target and, more importantly, signs that investors and consumers are losing faith it can get there any time soon.

    Despite undershooting the goal for three years, the Fed has long succeeded in convincing markets that the target was within reach. However, inflation expectations have begun slipping in recent weeks.

    Barring a turnaround, Fed officials would hesitate to raise interest rates as soon as mid-2015 even as gradually as their forecasts now suggest.

    At first sight, a combination of economic growth of nearly 4 percent, falling unemployment and price increases of around 1.6 percent looks good. Central bankers worry, though, that inflation, instead of picking up further, could head the other way. (SD-Agencies)