Inflation must be watched more closely, Fed’s Bernanke says

Inflation Rate Rises on Increased Commodity Costs

Inflation must be monitored "extremely closely" in the days ahead because commodity costs are not showing signs of stabilizing, Ben S. Bernanke, the chairman of the U.S. Federal Reserve, told an audience in Stone Mountain, Georgia.

Bernanke sees commodity prices to eventually go down and its impact on inflation "transitory" but also warns about forecasts being proven false.

"We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability," Bernanke said.

The Fed chairman's comments echoed those he made earlier before a Congressional panel and the Federal Open Market Committee about inflation concerns.

Bernanke also remarked that the U.S. economic recovery is "not as strong as we would like it to be" and is being further bogged down by home foreclosures which are expected to rise even higher in 2011.

The personal consumption expenditures index jumped 0.9 percent in February year-on-year. If energy and food expenses are factored in, prices jumped from 1.2 percent to 1.6 percent from January to February.

Bernanke has already confirmed that the Fed is going forward with the $600 billion Treasury bonds purchase until June to support the economy, but he has not committed to any concrete monetary policy after that second round of quantitative easing.

Benchmark interest rate has been pegged close to zero since December 2008 and will likely remain that low for the foreseeable future, the Fed said.

The U.S. dollar appreciated against the yen and the euro following the comments made by Bernanke regarding inflation.

Posted by James Fried on Tuesday April 05 2011, 5:57 AM EDT. Ref: Bloomberg. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0