Keeping inflation expectations under control is arguably a central bank's most important job. But it is also one of the most challenging given that the picture painted by the surveys, models and market prices relied on by policymakers is,

The Federal Reserve's quarterly dot plot also revealed how the central bankers expect the U.S. economy to perform this year.

The economic projections underscore the tight spot the Fed may find itself in this year: Higher inflation typically would lead the Fed to keep its key rate elevated, or even raise rates. On the other hand, slower growth and higher unemployment would often cause the Fed to cut rates to spur more borrowing and spending and lift the economy.