(by G. Finn)

Inflation has picked up in the U.S. economy, but because it remains historically low the Federal Reserve can likely stick with its pledged "measured" pace for interest-rate hikes, the head of the bank’s Chicago branch, Michael Moskow, said Friday. Should conditions change, the Fed will respond accordingly. "If the economy begins to overheat, the Fed will move more aggressively toward a neutral policy stance," he said in a speech to an investment conference here. The Fed’s target lending rate lies at 1.25 percent after the bank lifted rates for the first time in four years last month. Moskow said determining what is "neutral" policy is difficult, but he suggested the Fed’s inflation-fighting reputation might allow the bank to leave rates relatively lower for a longer period of time than in the past.