Fed chief declines to talk of plan on inflation

May 24, 2006|By BLOOMBERG NEWS

WASHINGTON -- Federal Reserve Chairman Ben S. Bernanke declined yesterday to show his hand on how the central bank will respond to investors' concerns that inflation is accelerating.

In response to a question during a Senate hearing on financial literacy, Bernanke said officials are watching how the economy develops between now and the end of June, echoing a statement accompanying an interest-rate increase May 10. He also apologized for discussing policy with CNBC anchor Maria Bartiromo at a Washington dinner last month.

The economy faces some "upside inflation risks," Bernanke said. "Some additional firming of policy might yet be needed in order to address those risks," he added, referring to the Fed's statement.

"We also noted at that time that our thinking on this would be very data-dependent," Bernanke told Sen. Jim Bunning, a Kentucky Republican who opposed his appointment. "We'd be looking at the data as they come in, making a decision on the full picture, and we have about a month to go."

Bernanke, who became chairman in February, is trying to uphold the Fed's inflation-fighting credibility as price pressures build on the back of higher energy costs and resilient economic growth. At the same time, some Fed officials are wary of tightening so much that they choke the economy.

"Bernanke is keeping close to the script," said Chris Rupkey, senior financial economist at the Bank of Tokyo Mitsubishi UFJ Ltd. in New York. "The fires of inflation may be getting hotter, but the Fed chairman is remaining cool so far. We don't think he broke any new ground today."

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