Federal Reserve Chairman Ben Bernanke in testimony yesterday downplayed concerns the Fed’s expansionary monetary policies and extraordinary credit-easing programs will lead to accelerating inflation.
Bernanke, in response to questions from members of the House Financial Services Committee during his second day of testimony on the Fed’s semiannual Monetary Policy Report to Congress, vowed to tighten policy “in a timely way.”
In prepared testimony identical to that which he gave Tuesday to the Senate Banking Committee, Bernanke reiterated the Fed’s intention to keep the federal funds rate “exceptionally low ... for some time” and to use “all available tools” to achieve financial stability and economic recovery.
Bernanke again gave a qualified forecast of better times later this year.
“If actions taken by the administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability — and only if that is the case, in my view — there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery,” he said.
His testimony included the Federal Open Market Committee’s latest quarterly, three-year forecast, which projects core inflation in the 0.9% to 1.1% range in 2009, 0.8% to 1.5% in 2010, and 0.7% to 1.5% in 2011. Longer term, the FOMC expects inflation to be 1.7% to 2.0%.
“We don’t expect inflation to be a problem for the immediate future — the next couple of years at least,” Bernanke said in response to a question on what the Fed will do to prevent inflation. He added that “it is very important once the economy begins to recover” for the Fed to “tighten monetary policy.”
— Market News International