Bernanke Says Fed "Attentive" to U.S. Dollar Slide
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Fed Chairman Ben Bernanke said the Federal Reserve bank is "attentive" to the slide in value of the U.S. dollar and that it has caused an "unwelcome" rise in import costs.
Speaking alongside European Central Bank President Jean-Claude Trichet and Bank of Japan Governor Masaaki Shirakawa at an IMF conference in Barcelona, Spain on Tuesday, Bernanke said interest rates are currently "well-positioned" for growth and stable prices and that the Fed will "act as needed" to meet the bank's mandate relating to both growth and prices.
"We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations and will continue to formulate policy to guard against risks to both parts of our dual mandate, including the risk of an erosion in longer-term inflation expectations," he said.
Bernanke also said the Fed has cut rates "substantially and proactively" and that the Fed's commitment to its dual mandate will be key to ensuring the U.S. dollar remains strong and stable.
On inflation, Bernanke said it is high, but noted the pass-through of costs to labour and products has so far been limited.
"Inflation has remained high, largely reflecting continued sharp increases in the prices of globally traded commodities," Bernanke said. "However, the continuation of this pattern is not guaranteed and will bear close attention."
He also said high inflation could lead the public to expect long-term price increases and become self-fulfilling.
Bernanke added that the housing market, house prices in particular, are showing signs of stabilization and that growth risks will remain to the downside. He said recent increases in oil prices pose additional downside risks to growth.
By Stephen Huebl and edited by Nancy Girgis
©CEP News Ltd. 2008
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