Fed's Bernanke sees unemployment and weak growth as bigger problems than inflation
The chairman of the Federal Reserve Board says he and other Fed members believe inflation will ease on its own accord.
WASHINGTON -- Federal Reserve Chairman Ben Bernanke outlined the central bank's approach to the economy today, saying he considers the country's faltering economic growth and rising unemployment a more immediate problem than rising prices.
The Fed has been keeping interest rates at low levels in an effort to spur economic growth despite signs that inflation is picking up. But in remarks at a Fed conference in Jackson Hole, Wyo., Bernanke said he and other Fed governors believe inflation will ease off by its own accord by the end of the year.
"[The Fed's] strategy has been conditioned on our expectation that the prices of oil and other commodities would ultimately stabilize, in part as the result of slowing global growth, and that this outcome, together with well-anchored inflation expectations and increased slack in resource utilization, would foster a return to price stability in the medium run," Bernanke told the conference, according to a text of the speech released by the bank.
"In this regard, the recent decline in commodity prices, as well as the increased stability of the dollar, has been encouraging. If not reversed, these developments, together with a pace of growth that is likely to fall short of potential for a time, should lead inflation to moderate later this year and next year," Bernanke said.
For much of the year, prices facing consumers as well as businesses have been growing, in part because of the high price of fuel, reaching record levels in July. The Consumer Price Index hit an annual rate of 5.6%, the highest level since 1991, and the Producer Price Index hit 9.8% for the year, the highest since 1981.
But at the same time, economic growth has slowed so much that most economists believe the economy is in a recession. They are particularly worried about a steady rise in unemployment, which hit 5.7% last month.
Bernanke cautioned that while unemployment and growth remain the dominant concern at the moment, the economy is volatile and the situation could change, especially if prices for oil and gas continue to seesaw.
"We will continue to monitor inflation and inflation expectations closely," Bernanke said. "The [Fed] is committed to achieving medium-term price stability and will act as necessary to attain that objective."
maura.reynolds@latimes.com
