Core inflation will inch up to 1.5% next year, the forecasting panel at the National Association of Business Economics projected Monday, well below the Federal Reserve’s target of 2%.

The Fed’s “QE2” decision at the beginning of the month to buy $600 billion in government bonds to prevent deflation was supported by about a third of the 51 economists surveyed. A third said it would lead to more inflation in years to come.

“There’s definitely an increase in worry about inflation in three to five years. They’re moderately, not highly concerned,” said NABE President Richard Wobbekind, associate dean of the Leeds School of Business at the University of Colorado.

Some observers have warned that if the Fed stoked inflation fears they could become self-fulfilling.

As Mark Luschini, Chief Investment Strategist at  Janney Montgomery, recently pointed out, ten-year TIPs have offered a yield in line with expectations that inflation would be about 1.5% a year over the decade. In response to the talk about Fed action against deflation, the pricing of 10-year TIPs shifted up to an expectation of 2.2.

But five-year TIPs now reflect only expectations of 1.6% for that period. This suggests that the market no longer fears deflation, and only modest inflation in coming years.

Core consumer prices rose 0.6 percent in October from a year ago, the smallest increase since records started in 1957.

NABE panelists project slow growth in the overall economy, housing prices and hiring, picking up as the year goes on.  "Projections for real GDP growth remain sub-par through the first quarter of 2011, but accelerate gradually through the forecast period," Wobbekind said.