Inflation fears bolster Fed case for rate halt
Federal Reserve chairman Ben S Bernanke said that interest rates are “well positioned” to promote growth and stable prices, and that policy makers are “attentive” to the impact of the falling dollar.
By Agencies |
WASHINGTON: Federal Reserve chairman Ben S Bernanke said that interest rates are ���well positioned��� to promote growth and stable prices, and that policy makers are ���attentive��� to the impact of the falling dollar.
The Fed is working with the Treasury to ���carefully monitor developments in foreign exchange markets��� and is aware of the effect of the dollar���s decline on inflation and price expectations, Bernanke said today in his first speech on the economic outlook in two months.
Signs of accelerating inflation bolster Bernanke���s case for pausing after the Fed lowered its main interest rate by 3.25 percentage points since September. The central bank is trying to mitigate harm from the collapse of the subprime mortgage market without endangering its credibility for keeping prices in check.
���For now, policy seems well positioned to promote moderate growth and price stability over time,��� Bernanke said in prepared remarks. ���We will, of course, be watching the evolving situation closely and are prepared to act as needed to meet our dual mandate.���
Bernanke, 54, spoke via satellite to the International Monetary Conference in Barcelona, Spain. He is talking on a panel with European Central Bank president Jean-Claude Trichet, Bank of Japan governor Masaaki Shirakawa and Bank of Spain governor Miguel Fernandez Ordonez.
The dollar has weakened 16% against the euro in the past year and traded at $1.5595 on Tuesday. ���We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations,��� Bernanke said. The Fed���s commitment to price stability and maximum employment ���will be key factors ensuring that the dollar remains a strong and stable currency.���
Minutes of the Federal Open Market Committee���s April 29-30 meeting showed that Fed policy makers, out of concern for inflation, wouldn���t pare rates further even with an economic contraction in the first half.
The decision to lower the main rate by a quarter point was a ���close call��� for most FOMC members, the minutes said. The reduction capped off 2.25 percentage points of reductions this year, including cuts of 0.75 point in January and in March. Traders expect the Fed to leave the overnight interbank lending rate at 2% through October.
The Fed is working with the Treasury to ���carefully monitor developments in foreign exchange markets��� and is aware of the effect of the dollar���s decline on inflation and price expectations, Bernanke said today in his first speech on the economic outlook in two months.
Signs of accelerating inflation bolster Bernanke���s case for pausing after the Fed lowered its main interest rate by 3.25 percentage points since September. The central bank is trying to mitigate harm from the collapse of the subprime mortgage market without endangering its credibility for keeping prices in check.
���For now, policy seems well positioned to promote moderate growth and price stability over time,��� Bernanke said in prepared remarks. ���We will, of course, be watching the evolving situation closely and are prepared to act as needed to meet our dual mandate.���
Bernanke, 54, spoke via satellite to the International Monetary Conference in Barcelona, Spain. He is talking on a panel with European Central Bank president Jean-Claude Trichet, Bank of Japan governor Masaaki Shirakawa and Bank of Spain governor Miguel Fernandez Ordonez.
The dollar has weakened 16% against the euro in the past year and traded at $1.5595 on Tuesday. ���We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations,��� Bernanke said. The Fed���s commitment to price stability and maximum employment ���will be key factors ensuring that the dollar remains a strong and stable currency.���
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Minutes of the Federal Open Market Committee���s April 29-30 meeting showed that Fed policy makers, out of concern for inflation, wouldn���t pare rates further even with an economic contraction in the first half.
The decision to lower the main rate by a quarter point was a ���close call��� for most FOMC members, the minutes said. The reduction capped off 2.25 percentage points of reductions this year, including cuts of 0.75 point in January and in March. Traders expect the Fed to leave the overnight interbank lending rate at 2% through October.
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