Bernanke: US risks slowdown, higher inflation
(NEW YORK) Federal Reserve chairman Ben Bernanke said yesterday the US economy faced significant risks to growth, while dismal data flashed fresh signs of stagflation.
‘The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth,’ Mr Bernanke said in remarks to the Senate Banking Committee.
Worryingly, he also said risks of faster inflation had intensified on the back of the rising prices of energy and other commodities.
US producer prices over the last 12 months jumped 9.2 per cent, the biggest increase since a 10.4 per cent gain in June 1981 while a regional manufacturing survey showed factory activity in New York contracted for the fifth time in six months and data in the report suggested producers were passing on higher prices to consumers, which could add further fuel to inflation.
Mr Bernanke’s comments are his first on monetary policy and the economic outlook since the Federal Open Market Committee’s June 25 decision to leave the benchmark interest rate unchanged at 2 per cent, pausing after seven cuts totalling 3.25 percentage points since September.
‘Helping the financial markets return to more normal functioning will continue to be a top priority of the Federal Reserve,’ the Fed chairman said. — Reuters, Bloomberg
Source : Business Times - 16 Jul 2008
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