Bernanke says US rates may rise more

| February 15, 2006 | 0 Comments

The new chairman of the US Federal Reserve, Ben Bernanke, in his first testimony in front of Congress after taking office, said on Wednesday that the US economy “performed impressively” last year. He also refused to close the door to further interest rate hikes, saying that higher energy prices could mean higher consumer prices, possibly fueling inflation. Mr. Bernanke promised, however, that the Fed would be “flexible” in regards to monetary policy decisions that that “all” relevant evidence would be taken into consideration before making those decisions.

Mr. Bernanke also acknowledged that a slowdown in the housing market could be a risk to the economy, but that such a slowdown would not necessarily signal a slowdown of the entire economy. And, in fact, his testimony came just a day after retail sales data showed that the US economy expanded in January after having performed below expectations in the fourth quarter of last year.

While the new chairman has indicated an intention to continue with monetary policies put in place by his predecessor, Alan Greenspan, he is also known to favor specific targets for inflation, unlike Mr. Greenspan. These targets, Mr. Bernanke believes, will increase transparency in the activities of the Fed as well as reduce the market speculation that surrounds uncertainty about future monetary policy decisions.

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