Tweet
http://money.cnn.com/2008/02/27/news...ex.htm?cnn=yes
Fed chief acknowledges troubling signs about economic growth but also issues sharp warning about inflation.
The economy still faces slower growth prospects but increasing inflation concerns could "complicate" the Federal Reserve's efforts to stimulate the economy, Fed Chairman Ben Bernanke told lawmakers Wednesday.
The central bank chief, in testimony before the House Financial Services Committee, said that the housing and labor market could deteriorate further and warned of tighter credit conditions.
But he added that the recent increases in energy prices and key commodities, as well as a weaker dollar, remain an inflationary risk and could further erode consumer spending.
"Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored," Bernanke said.
He warned the Fed may have to pull back on its efforts to stimulate the economy. "In the months ahead, the Federal Reserve will continue to monitor closely inflation and inflation expectations," Bernanke said.
While issuing a warning about inflation, Bernanke also said that the "housing market is expected to continue to weigh on economic activity" in coming months.
To help keep the economy from tipping into a recession, the Fed has steadily cut the federal funds rate, which affects a variety of consumer loans, since September. It slashed interest rates twice by 1.25 percentage points in just under a week last month.
Bernanke's remarks come amid recent warning signs about the economy.
A survey on residential real estate released Tuesday revealed that the decline in home prices picked up at the end of 2007. And consumer confidence fell to its lowest level in five years, the New York-based Conference Board reported, on fears about the job market and slowing business activity.
Right now, the growing consensus is that the Fed will cut interest rates by another half a percentage point when policymakers meet again on March 18.
Less than two weeks ago, Bernanke and Treasury Secretary Henry Paulson warned lawmakers of slower economic growth in the coming year but said they believed the U.S. economy would avoid tipping into a recession, helped in part by the $170 billion economic stimulus package signed by President Bush on Feb. 13 and the most recent interest rate cuts by the Federal Reserve
Fed chief acknowledges troubling signs about economic growth but also issues sharp warning about inflation.
The economy still faces slower growth prospects but increasing inflation concerns could "complicate" the Federal Reserve's efforts to stimulate the economy, Fed Chairman Ben Bernanke told lawmakers Wednesday.
The central bank chief, in testimony before the House Financial Services Committee, said that the housing and labor market could deteriorate further and warned of tighter credit conditions.
But he added that the recent increases in energy prices and key commodities, as well as a weaker dollar, remain an inflationary risk and could further erode consumer spending.
"Should high rates of overall inflation persist, the possibility also exists that inflation expectations could become less well anchored," Bernanke said.
He warned the Fed may have to pull back on its efforts to stimulate the economy. "In the months ahead, the Federal Reserve will continue to monitor closely inflation and inflation expectations," Bernanke said.
While issuing a warning about inflation, Bernanke also said that the "housing market is expected to continue to weigh on economic activity" in coming months.
To help keep the economy from tipping into a recession, the Fed has steadily cut the federal funds rate, which affects a variety of consumer loans, since September. It slashed interest rates twice by 1.25 percentage points in just under a week last month.
Bernanke's remarks come amid recent warning signs about the economy.
A survey on residential real estate released Tuesday revealed that the decline in home prices picked up at the end of 2007. And consumer confidence fell to its lowest level in five years, the New York-based Conference Board reported, on fears about the job market and slowing business activity.
Right now, the growing consensus is that the Fed will cut interest rates by another half a percentage point when policymakers meet again on March 18.
Less than two weeks ago, Bernanke and Treasury Secretary Henry Paulson warned lawmakers of slower economic growth in the coming year but said they believed the U.S. economy would avoid tipping into a recession, helped in part by the $170 billion economic stimulus package signed by President Bush on Feb. 13 and the most recent interest rate cuts by the Federal Reserve
Comment