Ben Bernanke Thinks Gas Prices Won't Fuel Inflation

Mar 15, 2011, 14:10

Ben Bernanke says that U.S. gasoline prices, up more than 40 cents in the past month, will probably not drive up underlying inflation.

The chairmen of the Federal Reserve made his comments in congressional testimony ahead of a Fed policymakers meeting Tuesday to discuss the economy and inflation prospects. The policymakers, from the Federal Open Market Committee, are to release a statement around 2:15 p.m. EST.

They are likely to say they expect core, underlying inflation to remain low, The Wall Street Journal reported, even if overall inflation -- the type that grabs headlines -- shows short-term price spikes.

Energy-price jumps, as well as food-price hikes, generally don't present a broader inflation problem unless they cause sustained increases in other consumer prices as well, Bernanke told Congress early this month. And he said he did not expect that to happen.

He said both the Federal Reserve Board and independent experts estimated inflation would remain around 2 percent through 2013 as the U.S. economy recovered from the recession.

Overall inflation was 1.6 percent for the 12 months that ended in January, the U.S. Labor Department's consumer price index indicated. Core inflation, excluding energy and food prices because they can be volatile, was 1 percent over the same period, the department said.

"Inflation can vary considerably in the short run," Bernanke told lawmakers. "Our objective is to hit low and stable inflation in the medium term," which the Fed defines as a couple of years.

The Federal Open Market Committee is expected to leave interest rates at current lows, the Journal said. It will also probably wait until its April 26-27 meeting before indicating what the Fed will do after its $600 billion purchase of government debt to speed up the recovery ends in June, MarketWatch reported.

The central bankers will likely know much more about the oil situation at the April meeting, PNC Financial Services Group chief economist Stuart Hoffman told MarketWatch.

The U.S. national average for regular unleaded gasoline was $3.56 a gallon Monday, up 43 cents from $3.13 a month ago, AAA said. The average was $2.79 a year ago, AAA said.

Bernanke said "until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established."

Source: UPI