Fed doesn't see long-term inflation threat

Prices increased 3.0 percent in the first quarter of 2005, slightly up from 2.9 percent the previous quarter. This piece of data, issued last week by the Commerce Department along side news of a slowing economy, caused many to utter a seldom heard word: stagflation.

Fears of stagflation--when the economy slows but prices increase--should have been quelled by the Federal Reserves announcment today. In big, bold letters, the Fed said, "Longer-term inflation expectations remain well contained."