US Fed warns of surging oil prices
Federal Reserve chairman, Ben Bernanke, has warned that a prolonged rise in oil prices would pose a danger to economic growth in the US.
Speaking to the Senate Banking Committee, Mr Bernanke’s comments come after Brent crude hit $119 a barrel – a two-and-a half-year high.
There have also been fears about the impact on oil supplies as unrest in Libya and the Middle East continues.
Mr Bernanke also said the surge in oil prices will lead to a modest rise in inflation.
This could pose a risk to the world’s largest economy, resulting in Americans spending less as prices for oil, petrol, food and other commodities increase.
Consumer spending is closely monitored in the US as it accounts for approximately 70% of total economic output.
Meanwhile, Mr Bernanke comments: “Sustained rises in the prices of oil and other commodities would represent a threat both to economic growth and to overall price stability, particularly if they were to cause inflation expectations to become less well anchored.
“We will continue to monitor these developments closely and are prepared to respond as necessary to best support the ongoing recovery in a context of price stability,” he added.
In related news, the International Air Transport Association (IATA) today revised its forecasts for the airline industry.
The forecasts have been revised on the back of surging oil prices, according to the industry body.
IATA said global airlines will make a profit of $8.6 billion (£5.3 billion) for 2011 – down from the $9.1 billion it estimated in December.