WASHINGTON — Federal Reserve Board chairman Ben Bernanke yesterday gave no clear signals of where he and his fellow monetary policymakers will be taking interest rates in coming months, pointing to both “significant downside risks” to economic growth and to “intensified” inflation pressures.

Bernanke, presenting his mid-year monetary policy report to Congress before the Senate Banking Committee, suggested it is not easy for the Fed to determine the appropriate policy stance just now. Balancing upside and downside risks presents the Fed with a “significant challenge,” he said.

He seemed to lean slightly toward concern about containing inflation expectations, saying the Fed would have to be “particularly alert” in that area.

But going beyond the usual economic risks, he said a “top priority” for the Fed must also be to return the financial markets to “more normal” functioning. For now, the various liquidity and other extraordinary steps the Fed has taken have “mitigated somewhat” the strains in financial markets, Bernanke said, while adding that they remain “under considerable stress.”

— Market News International

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