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Bernanke Says Inflation, Slowdown Complicate Policy (Update4)
By Craig Torres and Scott Lanman
Feb. 28 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke tried to assuage lawmakers' concerns that the central bank's interest-rate cuts will exacerbate inflation.
``While we can't do much about oil prices or food prices in the short run, we do have to be careful to make sure that those prices do not either feed substantially into other types of prices,'' Bernanke told the Senate Banking Committee today. The Fed must ensure that the public remains ``confident'' that it will control inflation, he said.
Senate Republicans and Democrats grilled the Fed chief on price stability during the second day of semiannual testimony on the economy to Congress. Bernanke said the Fed's forecast is for growth to strengthen and prices to stabilize as food and energy costs stop climbing in the months ahead.
Bernanke reiterated his message from yesterday that growth risks outweigh the chance of faster inflation, with recent data indicating ``sluggish economic activity in the near term.'' His deputy, Donald Kohn, said in a Feb. 26 speech that turmoil in credit markets and the possibility of even slower growth pose a ``greater threat'' than inflation.
Asked to compare the economic situation today with that of 2001, when the last recession occurred, Bernanke cited ``some similarities.'' Both have a ``sharp change'' in asset prices: technology stocks then and home prices now, he said.