Most tellingly, service-sector inflation, as measured by the consumer-price index for services excluding energy, rose 3.1 percent in the year to February. That's important because it closely reflects domestic wage pressures. It finally seems that the low jobless rate, which was at 5 percent in March, is starting to feed through into accelerating inflation.
Trends in foreign exchange and commodity markets have recently been pushing in the same direction. The dollar fell 3.8 percent in March on a trade-weighted basis, its largest monthly decline since September 2010. This has the potential to add to the inflationary momentum by lifting import prices. And the price of oil has now rebounded around 40 percent from February lows, back towards levels seen in December last year.
Yet Yellen has stressed risks to global growth and said she anticipates "only gradual" rate rises over the coming years. This tallies with the view of several Fed members in March "… that a cautious approach to raising rates would be prudent … [noting] their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate."