More from the Federal Reserve's resident genius.
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Fed chief says inflation not a threat to U.S.
Republican lawmaker disagrees, saying Fed won't see it until it's too late
WASHINGTON — Is inflation a growing threat or isn't it?
Federal Reserve Chairman Ben Bernanke thinks not, and he told a House Budget Committee meeting as much Wednesday even as lawmakers expressed worries about rising fuel and food prices in the United States and abroad.
The Fed might not see the inflation threat "until the cow is out of the barn" and inflation is spreading through the U.S. economy, warned committee chairman Paul Ryan, R-Wis.
“There is nothing more insidious that a country can do to its citizens than debase its currency,” Ryan said.
But Bernanke countered that while inflation is surging in emerging economies, there was little risk of it in the U.S.
“Inflation is expected to persist below the levels that Federal Reserve policymakers have judged to be consistent” with their mandate, Bernanke told lawmakers.
In his first appearance before the House since Republicans took control last month, Bernanke said the Fed is confident about continuing its plan, launched last November, to buy $600 billion in government debt to keep a lid on long-term borrowing costs.
The program has drawn ire from many policymakers in emerging markets, who have accused the United States of unfairly driving down the value of the U.S. dollar to boost exports. At home, many Republican lawmakers in Congress have attacked the program as potentially sowing the seeds of inflation.
Bernanke's inflation outlook was a tough message to deliver amid headlines of rising food and commodity costs across the globe. He also said expectations of future inflation had remained “stable,” suggesting little worry an inflationary psychology was building despite rising gasoline costs.
In prepared remarks, delivered before the hearing, Bernanke said the drop in unemployment over the last two months is encouraging, but cautioned that it will take several years for hiring to return to normal.
Bernanke expressed more confidence in U.S. economic growth, but he also warned that failing to forge a plan to reduce the government’s $1 trillion-plus deficits over the long term could eventually hurt the economy.
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