U.S. Federal Reserve Chairman Ben Bernanke signaled Tuesday that the central bank will hold interest rates steady as inflation pressures are rising.
"For now, policy seems well positioned to promote moderate growth and price stability over time," Bernanke said in his remarks delivered via satellite to an international monetary conference in Spain. A copy of the remarks was made available on the Fed website.
To prevent the economy from sliding into a recession, the Fed has cut a key interest rate by a combined 3.25 percentage points from 5.25 since last September. Its last action was taken late April, when it cut the rate by one quarter point to 2.0 percent.
"We may see somewhat better economic conditions during the second half of 2008, reflecting the effects of monetary and fiscal stimulus, reduced drag from residential construction, further progress in the repair of financial and credit markets, and still solid demand from abroad," the Fed chief said.
However, until the housing market, and particularly house prices, shows clearer signs of stabilization, growth risks will remain to the downside, he said, adding that recent increases in oil prices pose additional downside risks to growth.
Bernanke said inflation has remained high, largely reflecting continued sharp increases in the prices of globally traded commodities.
"The possibility that commodity prices will continue to rise is an important risk to the inflation forecast," he said.
Another significant upside risk to inflation is that high headline inflation, if sustained, might lead the public to expect higher long-term inflation rates, an expectation that could ultimately become self-confirming, Bernanke said.
Many economists believe that the Fed will hold rates steady at its next meeting on June 24-25 and probably through much, if not all, of this year.
"We will, of course, be watching the evolving situation closely and are prepared to act as needed to meet our dual mandate," the Fed chief said.
Source: Xinhua
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