Bernanke: Rising oil prices pose threat to economy
Tuesday, March 1, 2011
WASHINGTON (AP) — Federal Reserve Chairman Ben Bernanke told Congress on Tuesday that a prolonged rise in oil prices would pose a danger to the economy. But he said a more likely outcome is a temporary and modest increase in consumer prices, not runaway inflation.
Bernanke, in testimony to the Senate Banking Committee, also defended the Fed’s $600 billion bond-purchase program. He told the panel that it’s succeeding in helping the economy. But he avoided answering a question about how he measures its success.
Bernanke did express confidence that economic growth would increase this year. He cautioned, though, that it won’t be strong enough to quickly lower unemployment, now at 9 percent.
He also cited other risks to the economy, including rising prices for oil, gasoline, food and other commodities, and further weakness in home prices. All could cause Americans to spend less.
The Fed chief said the economy still needs the support of the bond-purchase program. He downplayed the risks of runaway inflation that others have raised.
“The most likely outcome is that the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation,” Bernanke said in the first of two appearances this week to deliver the Fed’s twice-a-year economic report to Congress.
The bond-purchase program is scheduled to end in June. It is intended to spur more spending and invigorate the economy by lowering rates on loans and boosting prices on stocks.
Republicans in Congress and some Fed officials worry that the program could trigger high inflation and a wave of speculative buying on Wall Street that could lead to new bubbles in the prices of assets like stocks and bonds.
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