Bernanke says U.S. inflation too high
Federal Reserve Chairman Ben Bernanke said rising long-term inflation expectations were a “significant concern” for policy-makers but dismissed worry a wage-price inflation spiral was developing.
“Some indicators of longer-term inflation expectations have risen in recent months, which is a significant concern for the Federal Reserve,” Bernanke told graduating students at Harvard University. “We will need to monitor that situation closely.”
He described overall inflation as “significantly higher than we would like,” the second straight day in which he sounded a warning on inflation, which financial markets took as a firm signal that interest rates are likely on hold for some time.
Nonetheless, Bernanke said he saw no sign a “1970s-style wage-price spiral, in which wages and prices chased each other ever upward,” might be starting. While inflation has averaged 3-1/2 percent over the past four quarters, that was much less than rates reached in the 1970s and again in 1980 online cash advance.
Analysts said the tone of Bernanke’s remarks indicated the Fed was firmly focused on inflation risks and was unlikely to ease rates.
“I’m not saying that he will not lower rates even if the economy falters severely, but he’s certainly suggesting that inflation is of equal importance,” said John McCarthy, director of foreign exchange at ING Capital Markets in New York.
Bond prices dropped after Bernanke’s remarks were published as investors bet it reduced chances for more interest-rate cuts but the dollar’s value rose against other currencies.
Stock prices fell on the fresh expression of concern about inflation risks.
Filed under: technology by Specialist