The reaction to news of higher consumer inflation leaves the Fed with a dilemma.

Before 1987 consumer inflation had not been as high as 4 percent since 1981.

Interest rates rose despite a Government report that consumer inflation remained subdued last month.

This is a reference to the high consumer inflation during the mid-70s.

This compared with 4.7 percent for overall consumer inflation in the same period.

But as consumer inflation slowed a bit, wholesale prices accelerated last month.

We are not worried about consumer inflation, because there is no indication you can pass on price increases at all.

But traders also began looking to today's report on consumer inflation.

Most expectations for consumer inflation in 1993 remain in the range of 3 to 3.4 percent.

The Government will report the main measure of consumer inflation tomorrow.