This is what the Federal Reserve says about the inflation on that paragraph:

"Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization.

Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully."

Source: By Real Estate Bubble

Here is what Chicago Tribune has to say about the Fed Rate Cut and Inflationary Worries:

"At the new 2.25 percent level, the so-called Fed funds rate is the lowest it's been since early 2005. In an accompanying statement, the Fed noted the weakness throughout the economy, and the disarray in the nation's financial markets, and made it clear that the bigger threat to the economy is from weakness, rather than inflationary pressures.

"Nonetheless, two FOMC members voted against the rate cut, favoring what the statement referred to as "less aggressive action".

"In its statement, the Fed said recent information "indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softene," while "financial markets remain under considerable stress." The tightening of credit conditions and the deepening of the housing contraction, the statement said, "are likely to weigh on economic growth over the next few quarters."

"Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased."